HE  TRUSTS 


ILLIAM  MILLER  COLLIER 


VUI'/Z2ZIT{  G:  CALIFORNL 
A^.T    LOS  ANGELES 


tf 


THE  GIFT  OF 

!         MAY  TREAT  MORRISON 

;  IX  MHMORY  OF 

;     ALEXANDER   F  MORRTSON 


The  Trusts 

what  can  we  Do  with  Them? 

What  can  they  Do  for  Us? 


BY 

William  Miller  Collier 

New  York  State  Civil  Service  Commissioner  ;  Author 
of  "Collier  on  IJankruptcy,"  etc. 


New  York. 

The  Baker  and  Taylor  Company 

5  and  7  East  Sixteenth  Street 


Copyright,  1900,  by 
THE  BAKER  AND  TAYLOR  COMPANY 


ROBERT   DRUMMOND,    PRINTER,    NEW   YORK 


C  '' 


PREFACE 


The  prohlom  of  the  trusts  is  a  momentous  one,  and  yet 
it  is  unqualifiedly  a  new  problem.  The  oldest  of  them 
(the  Standard  Oil  Company)  is  eighteen  years  of  age,  but 
the  great  majority  of  these  gigantic  combinations  have 
been  established  since  1897.  Furthermore,  those  of  most 
recent  creation  seem  animated  by  somewhat  different  pur- 
poses than  their  prototype;  and  they  present  new  problems 
or  new  phases  of  old  problems. 

There  cannot  be  any  doubt  that  the  trusts  are  filled  with 
great  dangers  to  our  industrial,  social,  and  political  system. 
To  say  that  these  dangers  are  "awful"  is  no  misuse  of 
tlie  word.  The  great  advantages  of  mammoth  business 
organizations  should  not  be  overlooked.  Such  organiza- 
tions arc  necessities  in  the  present  condition  of  American 
industries.  They  seem  to  be  the  only  effective  agencies 
whereby  we  can  develop  our  much  needed  foreign  markets, 
whereby  we  can  dispose  of  our  surplus  products,  and  thus 
give  constant  employment  to  our  workers  and  toilers.  Much 
of  our  anti-trust  legislation  has  overlooked  this  fact.  There 
is.  indeed,  a  danger  that  in  our  atteni])ts  to  stop  monopolies 
we  ]nay  cripple  our  ])roductive  energies  and  stifle  enterprise 
and  ])ring  our  country  into  a  condition  of  industrial  degra- 
dation and  into  bankruptcy.  To  obtain,  however,  the  most 
that  can  be  obtained  from  trusts,  to  achieve  the  highest 
(Icgi'i'c  of  success  that  can  come  fnun  the  use  of  trusts,  it 
:<  absolutelv  necessarv  that  we  u'uard  against  their  l)eco!ii- 


in 


IV  Preface 

in^  monopolies.  The  greatest,  the  speediest,  and  the  most 
ellieient  remedy, — the  one  that  should  be  first  employed, — 
unquestionably  is  publicity;  but  it  may  be  doubted  if  that 
is  entirely  sufficient,  either  theoretically  or  practically. 
Anti-trust  laws  Avhich  forbid  monopolies,  which  endeavor 
to  prevent  all  combinations  that  restrain  all  competition, 
which  fix  the  punishment  that  shall  be  meted  out  to  those 
who  violate  their  provisions,  which  denounce  as  illegal  and 
criminal  all  combinations  that  are  formed  for  the  purpose 
of  raising  prices  or  that  actually  do  raise  prices, — these  laws 
are  demanded  not  only  by  existing  conditions,  but  by  prin- 
ciples of  right  and  justice.  Anti-trust  laws  that  aim  to  kill 
the  great  "  octopi ""  that  have  readied  out  and  gathered  in 
all  of  the  establishments  in  certain  industries,  not  because 
of  any  economic  superiority  in  these  giant  combinations, 
but  because  they  are  fed  and  pampered  and  nourished  and 
sustained  by  special  privileges, — anti-trust  laws  that  aim 
to  kill  these  "'  octopi "  by  the  abolition  of  these  special 
privileges,  appeal  not  only  to  our  sense  of  fairness,  but  to 
our  common  sense.  They  are  likely  to  be  most  effective 
remedies.  Their  enactment  and  enforcement  will  in  all 
probability  kill  many  of  the  trusts  and  will  surely  do  away 
with  most  of  our  trust  evils.  Similar  laws  requiring  pub- 
licity of  all  those  affairs  of  our  giant  corporations,  which 
affect  the  public,  and  laws  forbidding  over-capitalization 
and  also  forbidding  unfair  "  cut-throat "  competition,  give 
})]•olni^e  of  speedy  and  lasting  relief.  Care  must  be  taken, 
however,  that  we  do  not  "  kill  the  goose  that  lays  the 
golden  egg."'  Care  must  be  taken  that,  in  ridding  our 
barn  of  rats,  we  do  not  cause  the  barn  to  be  burned. 

'I'he  book  wliich  is  here  presented  to  the  public  is  in 
the  nature  of  a  study.  It  is  our  belief  that  the  anti-trust 
legislation  wliich  lias  been  enacted  up  to  the  present  time, 
namely,  that  form  of  legislation  which,  in  terms,  has  for- 


Preface  v 

bidden  any  and  every  coniI)iiiation  of  competitors,  however 
great  or  small  might  be  ihe  combination;  and  wliicli  has 
forbidden  every  restraint  upon  competition, however  reason- 
able or  unreasonable  such  restraint  might  be,  and  however 
direct  or  indirect  a  result  of  the  combination  it  might  be, — 
this  anti-trust  legislation  is  ill-advised  and  is  likely  to  Ije 
injurious.  It  clouds  and  obscures  the  real  danger  and  the 
real  evil.  "We  must  restrict  and  restrain  and  curb  and 
limit;  and  there  are  some  things  which  we  must  prohibit 
and  prevent  and  make  criminal  and  penal;  but  it  is  abso- 
lutely necessary  that  we  know  when  to  prohibit  and  when 
to  limit;   wheii  to  prevent  and  when  to  restrict. 

In  our  first  chapters  we  have  endeavored  to  show  the 
phenomenon  of  trusts,  the  existence  and  the  mighty  growtli 
of  industrial  combinations,  their  various  forms,  and  the 
economic  and  legal  dilferences  between  them,  their  re- 
spective rights  and  liabilities  before  the  law.  We  have 
sought  in  succeeding  chapters  to  show  the  extent  to  which 
gigantic  organizations  of  industry  are  an  outgrowth  of  the 
conditions  of  modern  competition,  and  have  tried  to  set 
forth,  fairly  but  fully,  the  great  wastes  of  competition,  and 
the  great  advantages  as  well  as  tbe  disadvantges  of  the 
trust  system.  We  have  defined  monopoly,  not  only  as  the 
term  has  l)een  used  for  centuries  in  Ihiglish  jurisdiction, 
])ut  as  it  lias  been  modified  by  modern  industrial  condi- 
tions. We  have  endeavored  to  show  the  awful  evils  and 
dangers  of  monopoly, — of  that  absolute  or  sole  power  of 
sale  of  any  article, — the  complete  and  dominant  control 
of  anv  industry,— wbich  is  properly  called  monopoly,  re- 
gardless whetlier  it  is  the  result  of  a  special  and  ex- 
clusive legal  right  conferred  by  the  sovereign  or 
whether  it  is  a  power  incidental  to  gigantic  size.  The 
effect  of  potential  eom]ietition — its  strength,  its  weak- 
ness    its    limitations — is    fully    considered.       Subsequent 


vi  Preface 

chapters  treat  of  the  effect  of  trusts  upon  the  wage-earners, 
especially  those  who  are  banded  together  in  labor  unions: 
also  of  the  relation  of  trusts  to  displaced  labor,  and  to  the 
farmers.  While  there  is  unquestionably  an  underlying  and 
an  unceasing  tendency  towards  larger  and  larger  industrial 
organizations,  we  attempt  to  show  in  the  chapter  on  "Trusts 
and  Special  Privileges  "  that  in  very  many,  if  not  in  a 
majority,  of  the  cases,  trusts  are  the  results  of  special  priv- 
ileges. The  evils  of  over-capitalization  form  the  subject  of 
another  chapter.  The  relations  of  the  tariif  and  of  expan- 
sion to  trusts  are  also  exhaustively  discussed.  That  im- 
l)ortant  phase  of  the  question,  the  social  phase,  which  is 
so  often  overlooked,  has  been  considered  in  a  chapter  en- 
titled "  The  Man  and  the  Dollar,"  with  special  reference  to 
AVm.  J.  Bryan's  famous  speech  at  the  Chicago  Trust  Con- 
ference. The  scope  and  extent  of  legislative  powers  over 
trusts,  the  constitutional  limitations  and  restrictions,  are 
also  reviewed. 

The  momentous  questions  arising  out  of  trusts,  notwith- 
standing their  comparative  newness,  have  so  far  been  the 
subject  of  denunciation  rather  than  of  consideration. 
There  has  been  action  rather  than  consideration,  and  legis- 
lation rather  than  discussion.  So  great  are  the  dangers,  on 
tlie  one  hand,  of  no  action,  and,  on  the  other  hand,  of  rash 
and  improper  action,  that  we  feel  that  the  proper  charac- 
ter of  a  book  upon  the  subject,  at  this  time,  should  be  that 
of  a  study  or  an  inquiry,  rather  than  a  dogmatic  treatise. 
The  spirit  of  observation  and  of  investigation  is  the  spirit 
in  which  we  can  best  approach  the  immense  task  of  solving 
the  trust  problem.  In  that  spirit  we  have  endeavored  to 
write  this  study  of  the  great  question  of  the  day, — the 
great  question  of  the  age. 

Wii.  MiLLEPi  Colli  F.R. 
At'iu-rx,  X.  Y.,  July  4th,  1900. 


TABLE  OF  CONTENTS 


CHAPTEE  PAGE 

I.  The  Day  of  Great  Things 1 

yll.  What  is  a  Trust? 21 

III.  The  Mother  of  Trusts ,     ...  35 

IV.  The  Wastes  of  Competition 54 

V.  What  is  Monopoly? 88 

/VI.  Prices  and  Potential  Competition 103 

VII.  Trusts  and  the  Wage-Earner 131 

VIII.  Trusts  and  Displaced  Labor 156 

IX.  Trusts  and  the  Farmer 173 

X.  Trusts  and  Special  Privileges 190 

XI.  Promotion,  Over-Capitalization,  and  Publicity,  or 

Wind,  Water,  and  Light 208 

XII.  Whose  Fault  is  It? 233 

XIII.  Trusts  and  Expansion 260 

XIV.  The  Man  and  the  Dollar 277 

XV.  Legislative  Powers  over  Trusts 287 

XVI.  The  Remedy  for  the  Evils 299 

APPENDICES. 

A.  The  Federal  Anti-trust  Law  (Sherman  Act)      .     .     .331 

B.  Analysis  of  Amendments  Proposed  to  Same   ....  334 

C.  Sections  of  New  York  Anti-monopoly  Law     ....  335 

D.  List  op  Anti-Trust  Laws 337 


THE  TRUSTS. 


CHAPTEE  I. 

THE   DAY    OF    GKEAT    THINGS. 

Great  accomplishments  arc  the  results  of  great  forces 
marshalled  into  great  organizations.  It  is  the  day  of  great 
things, — great  aims  and  great  ambitions,  great  forces  and 
great  mechanisms,  great  undertakings  and  great  accom- 
})lishments,  great  opportunities  and  great  achievements, 
great  men  and  great  organizations.  The  greatness  of  to- 
day is,  however,  the  greatness,  not  so  much  of  creation  as 
of  combination,  not  so  much  of  construction  as  of  con- 
centration. The  century  that  is  closing  has  been  marvelous 
in  its  material  devclojiment  and  in  its  industrial  progress. 
What  we  have  done  is  greater  than  the  deeds  of  the  ages 
that  have  preceded,  because  we  have  combined  our  efforts 
and  have  worked  more  and  more  in  unison,  if  not  in  per- 
fect harmony.  What  we  sliall  do  in  the  future  is  likely  to 
dwarf  even  tlie  mighty  achievements  of  the  present  cen- 
tury, because  our  energies  are  more  concentrated,  our  forces 
are  better  combined,  our  interests  more  nearly  harmonized. 

The  tendency  of  tlie  age  towards  great  organizations 
manit'i'sts  itself  especially  in  those  spheres  of  activity  in 
which  we  can  acconi{)lish  results  only  by  some  form  of  co- 
operation,— politics  autl   economies,   government  and  in- 


2  The  Trusts 

(lustry.  Tlie  centuries,  that ;  a^e  gone  witnessed  many 
niighly  nation?; — emjxirc.s:  that'  spread  over  the  whole 
known  world.  But  ,sinc-e  despotism-  has  been  moditied  into 
limited  monarehitis  or  given  place  to  republics,  since  repre- 
sentative and  popular  governments  have  come  into  ex- 
istence, the  nations  of  the  world  have  never  been  larger 
or  more  powerful  than  to-day.  We  who  are  living  have 
seen  many  struggling,  discori.^ant,  wrangling  states  coalesce 
into  mighty  nations.  Within  forty  years  Italian  unity  has 
become  an  accomplished  result  after  centuries  of  strife. 
AVe  have  hardly  laid  aside  the  school  books  in  which  we 
studied  about  the  twenty  or  more  petty  kingdoms,  duchies, 
principalities  and  free  cities  that  now  form  the  invincible 
German  Empire.  English  colonies  are  scattered  over  the 
entire  globe.  Some  of  them  reach  up  into  the  frozen 
Arctic;  others  lie  in  the  vast  Pacific  in  the  southern  hemi- 
sphere, antipodal  to  the  mother  country;  some  of  them 
are  in  Europe,  some  in  America,  some  in  Africa,  some  in 
Asia  and  many  others  are  islands  of  the  sea.  All  of  them 
enjoy  to-day  a  greater  independence  and  freedom  than  they 
ever  had  before;  and  yet  the  movement  towards  imperial 
federation  of  English  colonies  is  growing  irresistibly.  Our 
own  great  civil  war,  with  its  bloody  and  costly  strife,  dur- 
ing which  the  doctrine  of  State  rights  and  the  heresy  that 
this  union  was  a  perishable  and  destructible  temporary 
federation  were  burned  up  in  the  fire  of  battle,  was  one  of 
the  strongest  jjroofs  that  the  tendency  towards  centraliza- 
tion and  combination  in  government  can  not  be  overcome. 
]>ut  the  (Striking  fact  of  the  history  of  the  century 
lias  been  the  tendency  towards  industrial  consolidation. 
Business  organizations  are  mammoth  in  size;  business  un- 
dertakings are  gigantic  in  their  scope;  business  manage- 
jnent  is  of  infinite  detail.  The  cause  of  all  this  is  that 
business  opportunities  have  so  mightily  increased  in  size 


The  Day  of  Great  Things  3 

and  number,  'i'he  great  improvements  in  the  means  of 
travel  and  transportation  and  communication  have  revohi- 
tionized  every  kind  of  business,  liiiihvays  are  trans-con- 
tinental; the  world  is  girt  with  cables;  telegraphs  and 
telephones  permit  such  immediate  conmmnication  that  the 
exchange  of  thought  and  idea  is  almost  as  quick  and  al- 
most as  subtle  as  mind  reading.  Steamship  lines  run  from 
port  to  port  with  the  regularity  of  a  river-ferry  service. 
The  nations  of  the  world  are  brought  into  closer  contact; 
the  products  of  each  zone  are  exchanged  in  every  other 
zone;  the  wants  of  the  Oriental  are  supplied  from  the 
mills  and  factories  of  Europe  and  America,  and  in  exchange 
the  Caucasian  seeks  the  wealth  of  Cathay.  China  is  carved 
into  spheres  of  influence  by  European  nations;  Africa 
is  parcelled  out  into  European  provinces.  Every  great 
power,  including  even  the  United  States,  has  now  its  colony 
or  province  or  annexed  territory  in  the  tropics  or  in  the 
opposite  hemisphere.  Raw  material  is  with  ease  brought 
from  one  quarter  of  the  globe  to  another  and  returning 
ships  take  back  the  manufactured  article.  Trade  is  no 
longer  merely  local.  The  market,  to-day,  for  every  factory 
and  every  mill,  is  the  world.  Two  generations  ago  it  was 
confined  to  a  locality  that  was  circumscribed  by  the  circle 
whose  radius  was  the  stage  route.  CJreat  are  the  oppor- 
tunities and  possibilities  of  the  age, — great,  amazingly, 
enormously  great  is  the  value  of  the  commerce  and  manu- 
factures of  to-day.  Yet  before  us  and  ahead  of  us  is  the 
commerce  and  the  stimulated  production  and  the  incalcu- 
able  riches  that  will  come  when  China,  India,  the  Philip- 
pines, and  the  other  countries  of  the  Orient,  with  their 
hundreds  of  millions  of  inhabitants  and  their  wealth  of  re- 
sources, shall  have  become  consumers  of  the  comforts  of 
civilization  and  producers  of  its  material  needs.  If  great 
business  organizations  have  been  necessary  in  the  past  to 


4  The  Trusts 

accomplish  economical  production  and  to  create  and  dis- 
tribute wealth  among  the  nations,  shall  we  not  need,  in  the 
future,  even  greater  organizations?  "  Canst  thou  pull  out 
Leviathan  with  a  hook?" 

Industrial  history  is  the  record  of  industrial  combina- 
tion. Two  centuries  ago  the  business  of  manufacturing 
and  the  business  of  commerce  were  all  done  by  individuals; 
but  business  was  conducted  within  the  smallest  and  most 
circumscribed  limits.  The  product  was  small;  labor  was 
manual,  or,  if  mechanical,  it  was  rudimentary  in  its  sim- 
plicity. The  market  was  local;  cost  of  production  was 
great  and  prices  were  high.  Inventive  genius  gradually 
produced  new  machines;  the  power  of  steam  was  applied 
to  their  propulsion.  But  machines  could  be  used  advan- 
tageously and  profitably  only  by  a  division  of  labor  and  by 
individual  specialization.  This  necessitated  bringing  to- 
gether into  one  enterprise  large  numbers  of  wage-earners. 
The  total  expense  of  carrying  on  a  business  became  so  great 
that  individuals  singly  and  alone  could  not  assume  it,  but 
two  or  more  individuals  by  uniting  their  capital  and  skill 
made  it  possible  for  larger  business  enterprises  to  be  con- 
ducted, and  the  partnership  became  the  form  of  indus- 
trial combination.  Xaturally  only  a  few  persons  could 
advantageously  be  embraced  in  any  one  partnership.  It 
was  not  a  good  means  of  combining  or  concentrating  very 
large  amounts  of  capital.  As  machinery  became  more  com- 
plex, as  it  Ijccame  necessary  more  and  more  to  subdivide 
labor  and  to  specialize,  and  to  bring  together  into  one 
factory  or  mill  an  increasingly  larger  number  of  laborers 
to  produce,  and  to  organize  into  one  force  a  larger  number 
of  persons  to  sell  and  market,  it  became  necessary  to  enlist 
the  capital  of  so  many  persons  that  not  all  of  them  could 
have  actual  oversiglit  and  management.  An  industrial 
organization  in  which  the  capital  of  many  could  be  com- 


The  Day  of  Great  Things  5 

bincd,  but  in  which  the  liabiUty  of  those  not  in  actual 
control  could  be  limited,  Avas  the  natural  result  of  these 
conditions  and  tlie  corporation  soon  became  the  usual  form 
of  combination  in  business  enterprises.  To-day  the  cor- 
porate form  is  rapidly  displacing  the  individual  and  the 
partnership.  Individualism  in  business, — absolute  indi- 
vidualism,— that  individualism  which  produces  by  the  toil 
of  any  one  man  everything  which  that  one  needs, — exists 
only  in  the  state  of  lowest  savagery,  if  even  there.  It  is 
equally  true  that  individualistic  production,  in  the  broader 
but  more  usual  sense  of  production  by  persons  unassoci- 
ated  in  corporate  form,  is  becoming  rarer  and  rarer.  Not 
only  is  the  business  of  the  world  done  by  corporations,  but 
the  corporations  are  daily  consolidating  and  combining. 
Capitalization  is  becoming  larger  and  larger.  Millions  and 
liundreds  of  millions  of  dollars  of  capital  are  brought  to- 
gether in  one  centralized  organization;  thousands  and 
tens  of  thousands  of  men  are  subject  to  one  management. 
The  year  1898  saw  over  $900,000,000  concentrated  in 
mighty  industrial  combinations.  The  first  two  months 
of  1899  saw  business  corporations  formed  whose  capitaliza- 
tion was  $1,100,000,000.  It  did  not  continue  throughout 
1899  at  that  rate,  but  the  month  of  March,  1900,  has  seen 
the  formation  of  one  single  combination  of  the  steel  and 
allied  industries  inwhich  Andrew  Carnegie  and  his  partners 
are  interested,  whose  capitalization, — the  capitalization  of 
one  corporation, — is  $200,000,000,  a  sum  that  is  not  an 
excessive,  but  rather  a  modest  capitalization  of  its  earning 
capacity,  which,  in  net  profits,  for  the  ensuing  year  is  esti- 
mated at  $10,000,000,  or  twenty  per  cent  upon  the  capitali- 
zation. 

The  progress  froin  individual  to  partnership  ownership 
was  slow  and  stendy.  The  transition  in  no  manner  affected 
the  social  or  political  organization  of  the  community;    its 


6  The  Trusts 

effects  were  almost  wholly  economic.  In  nearly  all  these 
cases  there  remained  individual  control  and  individual  lia- 
bility. The  change  from  the  partnership  and  individual 
to  the  corporate  formation  has  been,  from  the  start,  criti- 
cised, resisted  and  opposed,  but  its  advance  has  been 
rapid  and  continuous,  and,  notwithstanding  many  apparent 
evils,  beneficent.  The  past  thirty  years  have  seen  corpora- 
tions grow  and  increase  greatly  in  size.  But  the  tendency 
for  great  corporations  to  merge  into  still  greater  corpora- 
tions U}iiil  nearly  all  the  productive  forces  in  any  one  in- 
dustry have  hee?i  amalgamated  into  one  great  body  has  been 
a  comparatively  recent  movement  and  has  come  with  sud- 
denness and  without  preparation.  In  a  list  of  trusts  and 
combinations  appearing  in  an  article  by  Byron  W.  Holt  in 
The  Review  of  Beviews  for  June,  1899,  there  are  contained 
about  one  hundred  and  twenty  corporations,  the  capital  of 
none  of  which  is  less  than  ten  millions.  About  one  half 
of  these  were  formed  in  1899.  There  are  comparatively 
few  in  the  whole  list  that  have  been  formed  more  than  five 
years;  and  of  these  the  majority  have  been  reformed  and 
reorganized  within  that  period.  In  1899,  The  Journal  of 
Commerce  in  its  year-book  published  a  list  of  three  hundred 
and  fifty-three  trusts  and  combinations  in  existence  in 
]\rarch  of  that  year.  These  trusts  Avere  then  capitalized  as 
follows:  common  stock,  $4,247,918,921;  preferred,  $870,- 
075,200;  bonded  indebtedness,  $714,388,661;  total.  $5,- 
832,882,843,  or  an  average  of  nearly  $17,000,000  for  all 
of  the  three  hundred  and  fifty-three  combinations.  These, 
it  is  to  be  borne  in  mind,  are  nearly  all  corporate  com- 
binations. In  them  are  included  only  a  very  few  of  the 
combinations  which  are  merely  agreements  to  raise  prices, 
to  control  ])ro(lnction,  io  ado]it  rules  to  regulate  trade,  or  to 
enable  members  to  protect  themselves  from  encroachments 
upon  their  business.    An  eminent  authority  has  stated  that 


The  Day  of  Great  Things  7 

it  is  probable  that  of  great  incorporations  which  woukl 
popularly  be  called  trusts,  there  were  by  July  1,  1899,  more 
than  live  hundred  in  the  United  States,  with  an  aggregate 
nominal  capitalization  of  from  six  to  eight  billions  of  dol- 
hirs  (.$G,0()U,OUO,OUU  to  $8,0()(),000,000);  and  besides  these 
there  were  about  live  hundred  combinations  and  pools 
which  were  not  corporate  in  form.  We  here  give  a  list  of 
the  most  important  industrial  corporations  existing  July  1, 
1899,  with  the  amount  of  their  capitalization,  bonded  in- 
debtedness, date  of  formation,  and  place  of  incorporation. 
Only  those  having  a  total  capitalization  of  at  least  ten  mil- 
lions of  dollars  are  mentioned.     (For  list  see  pages  8-13.) 

More  and  more  does  the  tendency  for  industries  to  com- 
bine into  great  corporations  manifest  itself.  Our  list 
shows  those  in  existence  July  1,  1899,  but  during  that 
year,  according  to  Tlie  Commercial  and  Financial  Chronicle, 
there  were  formed  corporations  having  a  total  capitaliza- 
tion of  $3,51  "-3,280,000,  made  up  as  follows:  common 
$2,285,555,000,  preferred  $899,775,000,  bonded  indebted- 
ness $326,950,000.  One  thousand  millions  of  this  were 
probably  included  in  the  list  of  The  Journal  of  Commerce 
above  mentioned  as  brought  down  to  March,  1899.  If  so, 
the  balance  or  $2,512,280,000  should  be  added  to  the  $5,- 
832,882,812,  in  order  to  bring  the  list  down  to  January  1, 
1900,  making  the  total  about  $8,350,000,000  at  that  time. 
As  already  mentioned,  the  present  year  1900  has,  in  March, 
seen  the  incorporation  of  the  Carnegie  Company, — one 
cor])oration,  at  $200,000,000. 

Quite  equal  to  the  aggregate  of  all  the  wealth  that  is 
represented  by  the  ca})italization  of  these  gigantic  indus- 
trial corporations,  is  that  which  is  combined  or  pooled  by 
virtue  of  mutual  agreements,  sometimes  written,  some- 
times verbally  expressed,  and  sometimes  only  implied. 
Such  are  the  combinations  of  the  anthracite  coal  miners, 


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The  Day  of  Great  Things 


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14  The  Trusts 

the  pools  of  the  insurance  companies^  and  the  greatest  of 
all  j)ools,  those  of  the  great  freight  and  passenger  associa- 
tions whose  purpose  is  merely  to  fix  rates.  Other  exam- 
jjles  of  combinations  that  are  not  incorporated  are  the 
organization  long  maintained  by  the  steel  rail  manufac- 
turers; the  agreement  or  unison  between  Armour,  Swift, 
Morris,  and  Hammond, — the  "  Big  Four," — in  the  meat 
business;  and  countless  associations  of  merchants,  both 
■wholesale  and  retail.  The  extent  to  which  industry  is  under 
the  control  of  corporations  of  enormous  capitalization  or 
of  individuals  or  corporations  acting  in  combination,  can 
be  best  appreciated  not  so  much  ]jy  attempting  to  count 
the  nundjer  of  such  corporations  or  combinations  as  by 
considering  our  various  wants  and  needs,  the  commodities 
and  products  that  we  use,  and  inquiring  how  many  of  them 
there  are,  the  production  and  distribution  of  -which  are, 
either  wholly  or  to  a  very  great  extent,  under  the  control 
of  such  corporations  and  cojnbinations.  There  is  hardly 
anything  (excepting  vegetables,  fruits  and  a  few  other 
agricultural  products)  wliich  we  eat  or  drink  or  wear  or 
use  or  enjoy  that  is  not  largely  controlled  either  in  its 
production  or  distribution  In-  great  cor])orations  or  else  by 
combinations  of  individual  competitors.  The  service  of 
supplying  those  of  us  who  live  in  cities  and  large  villages 
with  many  of  our  absolute  necessities  is  necessarily  almost 
a  mojiopolistic  jjriviiege.  Our  water  and  our  means  of 
illumination,  our  gas  and  oui'  electricity,  ai'e  all  supplied 
by  corporations  of  great  caj)ital  and  generally  without  com- 
petitors, except  in  those  cases  in  which  the  juuiiicipality 
itself  has  assumed  tlie  monn])oly.  The  price  of  nearly 
everything  we  use  is  largely  alfeeted  by  the  cost  of  trans- 
portation, and  the  means  of  transjjortation  are  in  the 
hands  of  great  cor|)<jrati(jns.  J'ut  aside  from  these  things 
\vliicli  are  inse})arably  connec-led   willi   ](uhlic  service,  the 


The  Day  of  Great  Things  15 

rendering  of  which  is  naturally  monopolistic,  we  find  that 
all  or  nearly  all  oi'  tlie  material  comforts  of  life  are  now 
supplied  to  us  by  industrial  organizations  and  combinations 
of  vast  capitalization.  Look  at  the  list  of  articles  made 
or  sold  by  these  corporations:  fertilizers,  alkali,  beet 
sugar,  briclc,  brass,  bicycles,  railroad  cars,  cotton  oil,  elec- 
tric-heating apparatus,  lish  (})acketl),  window-glass,  gas  and 
electric  lighting  fixtures,  hides  and  leather,  ice,  linseed  oil, 
lithograph  productions,  sewing  machines,  malt,  seliool 
furniture,  ships,  silk  thread,  whisky,  wire,  steel-hoops, 
sugar  (cane  sugar),  thread,  tin-plate,  tobacco,  woolen 
goods,  writing  pajier,  copper,  snutf,  ])olts  and  nuts,  borax, 
steel,  lumber,  pharmaceutical  products,  beer  and  ale  (there 
being  combinations  of  breweries  in  the  following  cities: 
Chicago,  San  Francisco,  Pittsburgh,  Boston,  Cleveland  and 
Sandusky,  Baltimore;  also  Milwaukee  and  Chicago) ;  coaland 
iron  (industries  of  Colorado,  also  of  Tennessee),  electric-car 
lighting  apparatus,  steel  cars,  cement,  plug  tobacco,  cot- 
ton yarn,  matches,  electric  boats,  electric  storage  batteries, 
sewer  pipe,  chemicals,  general  electrical  apjniratus,  glu- 
cose sugar,  granite  ware,  Cuban  tobacco,  pajjer  (news  and 
printing),  silver  })late,  smokeless  powder  and  dynamite, 
steam  pumps,  '"Bourbon"  whisky  (Kentucky  distilleries), 
iron  (Lake  Superior  mines),  cellulose,  biscuits,  crackers  and 
bread-stuli's,  carbon,  carpets,  enameling  and  stamping, 
white  lead,  salt,  screws,  starch,  tubes,  wall-paper,  pine  tim- 
ber, passenger  elevators,  plate-glass,  ])rint  cloth,  iron  and 
steel,  baking  powder,  rubber  goods,  coal,  window-sashes  and 
doors,  flour,  petroleum  and  its  by-products,  whisky,  rope 
and  twine,  steel  beams,  steel  rails,  beef,  coal  and  iron, 
paper  bags,  typewriters,  fruit,  shoe  machinery,  cast-iron 
pipe,  dye-wood,  Hour,  glue,  leather,  rubber  boots  and  shoes, 
varnish,  writing  paper,  etc.     All  the  articles  just  men- 


1 6  The  Trusts 

tioned  are  made  by  corporations  none  of  which  are  capital- 
ized for  less  than  $10,000,000. 

Even  more  important  than  the  amount  of  the  capitaliza- 
tion are  certain  facts  showing  the  extent  of  the  control 
over  the  various  industries  by  these  corporations  and  the 
number  of  smaller  concerns  that  have  been  amalgamiated 
into  them.  Thus  the  Kentucky  Distilleries  Co.  embraces 
fifty-seven  distilling  plants;  the  Union  Typewriter  Co.  is 
a  combination  of  the  five  leading  typewriter  manufacturing 
companies;  the  American  Agricultural  Co.  is  to  embrace 
twenty-three  fertilizing  plants;  the  National  Wall  Paper 
Co.  was  formed  for  the  purpose  of  consolidating  thirty 
concerns  formerly  competing  with  each  other;  the  Otis 
Elevator  Co.  embraces  thirteen  concerns  and  turns  out 
eighty-five  per  cent  of  the  passenger  elevators  made;  the 
American  Brick  Co.  controls  the  market  in  'New  York  City; 
the  Atlantic  Snuff  Co.  embraces  all  but  two  of  the  snuff 
factories  of  the  country;  the  American  Tin  Plate  Co.  is 
a  consolidation  of  about  forty  plants  and  two  hundred  and 
ninety  mills;  the  American  Cotton  Oil  Co.  is  a  union  of 
one  hundred  and  twenty-three  properties;  the  National 
Biscuit  Co.  includes  ninety  per  cent  of  all  the  large  bak- 
eries in  the  United  States;  the  National  Starch  Co.  is  a 
consolidation  of  about  twenty  companies;  the  American 
Linseed  Oil  Co.  owns  eighty-two  plants  or  eighty-five  per 
cent  of  all  those  in  the  United  States;  the  Writing  Paper 
Trust  was  projected  as  a  consolidation  of  thirty-five  mills 
in  the  Connecticut  Valley;  the  National  Car])on  Co.  in- 
cludes all  tlie  American  companies  in  this  industry  and  a 
majority  of  all  in  tlie  world;  the  Consolidated  Ice  Co.  em- 
braces ten  or  twelve  companies  in  New  York  and  Elaine, 
while  to  ensure  absolute  control  the  American  Ice  Co.  was 
formed.  It  has  absorbed  the  Consolidated  and  the  Knick- 
erbocker and  has  for  this  year  a  practical  monopoly  in 


The  Day  of  Great  Things  17 

Xew  York  City,  owning  tlic  available  supply  of  ice  and  all 
the  refrigerating  plants,  and  having  eontracts  to  take 
the  surplus  ice  made  by  all  the  breweries  and  other  private 
ice  plants,  besides  possessing  almost  exclusive  docking 
privileges.  The  assets  of  the  company  are  shown  by  the 
following  clip])ing  from  Tlie,  New  York  Herald: 

ilr.  Shcarn  first  introduced  in  evidence  tlie  charters  of  the  Con- 
solidated and  Knickerbocker  Ice  companies  and  of  the  American 
lee  Company,  nhowing  the  directors  of  tlie  last  named.  A  state- 
ment showed  that  the  American  Ice  Company  owned  29,337  shares 
of  the  preferred  and  5't,981  shares  of  the  common  stock  of  the 
Consolidated  Company,  and  r)5,768  of  the  common  and  37,952 
shares  of  the  preferred  stock  of  the  Knickerbocker  Ice  Company. 
['J'he  stock  of  each  of  the  last  two  companies  consisted  of  1()(),000 
sliares.]  William  McClure,  Secretary  of  the  New  York  Stock  Ex- 
change, produced  llie  statement  of  Secretary  Scott  to  the  Exchange. 
It  shows  that  the  American  Ice  Company  owns  118  ice-houses,  32 
factories,  and  112  bridges.  It  leases  for  a  long  term  of  years  twenty- 
six  ice-houses  and  twenty-one  ice  plants.  It  harvests  ice  on  the 
upper  Hudson,  Lake  Xehagh,  Lake  JIatooch,  Croton  Lake,  at 
White  Haven,  Pa.;  East  Mahoney,  Pa.;  Wliite  Lake  and  Green- 
wood Lake,  X.  Y.,  and  Lake  Schonk.  Ice  is  sold  in  New  York, 
Brooklyn,  Philadelphia,  Camden  and  Atlantic  City,  N.  J.,  Balti- 
more, ild.,  and  Lakewood,  X.  J.  The  total  output  is  4,500,000  tons 
a  year. 

The  American  Malting  Co.  embraces  thirty  companies, 
nearly  all  in  the  United  States;  the  Glucose  Sugar  Refin- 
ing Co.  controls  all  the  refineries  of  that  kind  of  sugar  in 
the  United  States.  A  short  time  ago  its  president  declared 
that  it  had  no  rival  in  o])eration.  The  International  Silver 
Co.  includes  twenty-four  companies,  or  seventy-five  per 
cent  of  all  in  the  United  States;  the  National  Steel  Co. 
Avas  formed  to  include  about  twenty  companies;  the  Royal 
Baking  Powder  Co.  was  a  consolidation  of  all  the  compan- 
ies in  that  industry;  the  Ignited  States  Rubber  Co.  is  said 
to  control  the  trade  of  the  country  in  rubber  boots  and 


1 8  The  Trusts 

rubber  shoes;  the  United  States  Varnish  Co.  was  projected 
to  include  all  the  concerns  in  that  business  in  the  United 
States,  and  likewise  the  United  States  Dyewood  and  Ex- 
tract Co.  started  out  to  amalgamate  all  in  that  industry 
in  the  United  States.  Xot  one  of  the  many  corporations 
before  mentioned  is  capitalized  for  less  than  $10,000,000; 
while  scores  of  them  are  capitalized  at  from  $40,000,000 
to  $200,000,000. 

Great,  indeed,  are  these  industrial  condjinations.  Mul- 
titudes, whose  numbers  exceed  the  population  of  many 
countries,  are  dependent  upon  them  for  their  supply  of  the 
commodities  and  necessities  of  life.  Their  employees,  de- 
pendent upon  them  for  a  living,  outnumber  the  armies  of 
the  mightiest  sovereigns.  Their  capitalization  rivals  the 
wealth  of  nations;  their  incomes  surpass  the  revenues  of 
states.  Their  power  is  centralized;  it  is  sometimes  re- 
garded as  irresponsible.  The  rights  of  the  community 
and  of  employees  and  even  of  the  small  shareholders,  the 
minority,  are  more  or  less  ill-defined,  and  not  infrequently 
are  entirely  disregarded. 

Are  these  mighty  institutions  a  menace  to  industrial 
progress  and  to  human  liberty?  Can  they,  by  acquiring  the 
means  of  j^roduction  and  the  agencies  of  distribution,  tax 
the  world  at  their  own  selfish  wills  for  its  food  and  drink 
and  clothing  and  the  thousands  of  comforts  which  have 
become  the  necessities  of  civilization?  Can  they  extort 
from  us  what  they  will,  or  even  take  more  than  they  fairly 
ought,  as  a  price  for  the  things  we  must  have?  Can  they, 
by  absorbing  or  crushing  out  all  other  producers,  become 
the  sole  employer  of  labor  with  power  to  decrease  wages 
at  will?  Can  they  become  the  sole  buyer  of  all  our  raw 
materials,  and  offering  the  only  market,  lower  tlie  ])riee  to 
what  they  are  willing  to  ])ay?  Can  they,  by  gathering  into 
their  hands  all  of  tlie  tbinu's,  (U-  all  of  anv  one  thing  which 


The  Day  of  Great  Thinr^s  19 

we  need,  make  lis  ir.dusirial  slave.-,  and  then  deprive  lis 
of  all  other  liheiiies?  Can  tlu>v  [)re-eni])t  tlie  iield.s  of  in- 
duftUT,  and  deny  to  all  others  the  power  to  work  for  a  liv- 
ini^,  to  aecpiire  wealth,  and  to  aehieve  sucees.s  in  business? 
Can  they  close  the  ""  opcMi  door  ""  of  ojiportunity? 

The  very  lai'<i-e  is  always  terrifyiii^u-  at  lirst,  hut  it  is  the 
unkin)wn  that  tills  us  with  g-reatest  fear.  W'lien  we  be- 
come aetpiainteil  with  the  vast  or  j)rofoun(i  it  no  longer 
frightens  us.  Let  us,  then,  tilled  with  li0])e  that  industrial 
cond)iiuUions  nun'  not  be  liberty-crushing,  and  yet  nu)ved 
with  courage  to  combat  them  if  we  lind  them  threatening 
us,  study  them  to  ascertain  their  causes,  their  metliods, 
their  benefits,  their  evils,  their  limitations.  Other  great 
things  have  in  the  |)ast  filled  us  with  terror.  We  have 
tried  to  destroy  them.  ►Sometimes  we  have  succeeded.  At 
other  times  the  forces  were  irresistible  and  we  have  tried 
regulation  ami  control,  only  to  find  that  the  irresistible 
when  controlled  were  benelicent.  The  benefactors  of  the 
world  are  they  wdio  have  taught  us  liow  to  make  use  of 
these  controlled  forces,  these  mighty  elements.  We  owe 
something  to  the  man  who  invented  lightning-rods  to 
ward  olf  from  us  the  lightning  flash,  but  this  tlebt  is  insig- 
nilicaiit  com})ared  with  that  which  v/e  owe  to  tlie  inventor 
of  the  telograi)h,  the  telephone,  the  electric  light,  or  the 
electric  motor. — inventions  that  wei'e  the  result  of  a  con- 
trol and  regulation  of  a  mighty  force. 

All  forces  may  thus  be  used  to  advantage.  The  Creator 
did  not  turn  them  loose  for  no  purpose.  Universal  ten- 
dencies are  the  results  of  great,  though  sometimes  itnseen, 
forces.  These  forces  are  to  be  utilized  if  possible.  The 
movements  of  those  forces, — the  tendencies  of  the  times, — 
niai/  he  the  uncontrolled  and  unregulated,  the  harmful  and 
wrongful,  acti(m  of  those  forces;  Ijut,  Avhen  these  ten- 
dencies are  progressive  through  all  the  ages,  when  their 


20  The  Trusts 

manifestations  in  the  past  have  been  the  accompaniments 
of  civilization,  we  may,  at  least,  have  hope  enough  and 
confidence  enough  to  attempt  their  careful  study  in  order 
to  see  if  they  cannot  he  used  instead  of  abused,  utilized  in- 
stead of  neutralized,  made  creative  and  productive  instead 
of  destructive.  Xo  change  is  brought  about  that  does 
not  have  attendant  evils.  The  wise  man,  however,  does  not 
destroy  the  new  thing.  He  ac-'^epts  and  uses  it,  avails  him- 
self of  its  advantages,  and  guards  against  its  dangers.  Can 
we  do  this  with  the  great  industrial  organizations  of  the 
day? 


CITAPTER  II. 

WHAT    IS    A    TRUST? 

Men'  frequently  get  had  names.  Sometimes  they  de- 
serve them;  sometimes  not.  Deserved  or  undeserved,  it  is 
liard  to  get  rid  of  them.  '"'  The  Ijest  tlung/''  says  a  well- 
known  American  humorist,  '"  that  could  happen  to  some 
people  Avould  he  to  lose  their  reputations;  perhaps  they 
could  find  better  ones."  Words,  like  people,  sometimes  get 
had  names  undeservedly.  They  are  given  meanings  that 
suggest  the  vicious,  the  bad,  or  the  tyrannical,  wdien  per- 
haps their  true  meaning  is  foreign  to  all  these  qualities. 
"  Trust "'  is  such  a  word.  It  pertains  primarily  to  one  of 
the  noblest  of  human  faculties,  but  to-day  it  has  an  appli- 
cation to  industrial  affairs  that  makes  it  to  many,  sugges- 
tive only  of  an  enormity, — a  gigantic,  merciless,  oppres- 
sive, price-raising,  production-strangling,  wage-reducing, 
business  organization.  Xot  only  has  the  word  "  trust " 
been  thus  perverted  from  its  original  meaning,  but,  in  the 
popular  use  of  it  as  a  legal  term,  it  is  to-day  a  misnomer. 

The  first  combinations  called  •"trusts"  were  properly 
designated  by  that  term.  The  earliest  of  them  was  the 
Standard  Oil  Trust,  wliicli,  as  a  trust,  was  formally  organ- 
ized in  IScS'-.?.  'j'his  was  a  trust  in  the  correct  legal  sense 
of  the  word.  'I'he  several  firms  and  cor])orations  which 
sought  to  cond)ine  tiieir  interests  did  not  merge  them  into 
one  corporation  nor  sell  them  all  lo  any  one  imlividual 
or  se(  of  indi\  idu.ils.     On  the  contrary,  the  several  proper- 

21 


2  2  The  Trusts 

tics,  whether  corporate  or  individual,  remained  in  equity 
distinct,  but  they  were  all  transferred  in  trust  to  a  certain 
few  persons  as  trustees  to  manage  them  in  the  interests 
of  the  several  owners.  The  values  of  the  respective  prop- 
erties were  ascertained,  and  the  trustees  issued  trustees' 
certificates  to  the  owners  for  their  respective  proportionate 
shares  in  the  aggregate  of  the  property  turned  over  to  the 
trustees.  In  som.e  cases  all  the  stock  of  the  corporations 
was  transferred  to  the  trustees;  in  otliers  only  a  majority 
of  the  shares;  hut  whatever  the  extent  of  the  interest, 
enough  of  it  was  turned  over  to  the  trustees  to  give  them 
control  of  the  several  properties.  Tiiere  was  one  manage- 
ment, one  policy,  and  one  great  coiubiiiatiou,  so  far  as  pro- 
duction or  marketing,  price-making  or  j)rofit-s]iaring,  was 
concerned.  Stili  the  beneficial  title  to  all  these  properties 
remained  in  tlieir  several  owners.  The  different  subsidiary 
corporations  were  still  distinct.  The  combination  was, 
strictly  speaking,  a  "  trust."  The  Standard  Oil  Trust  was 
a  marvelous  success;  at  least,  for  those  interested  in  it. 
It  soon  had  imitators.  The  Cotton  Oil  Trust  was  estab- 
lished in  1883,  and  about  a  half  dozen  other  genuine  trusts 
of  prominence  were  created.  Among  them  was  the  Sugar 
Ecfmeries  Co.,  better  known  as  the  Sugar  Trust,  which 
in  1891  was  reorganized  as  a  corporation  and  became 
known  as  The  American  Sugar  defining  Co. 

These  arrangements — for  they  were  arrangements  rather 
than  institutions — have  passed  away.  They  did  not  die  "  a- 
borning  "';  on  the  contrary,  they  were  lusty,  strong  and 
powerful,  ])ut  nevertheless  they  were  short-lived.  The  cry 
of  "  monopoly!"  was  raised.  Courts,  legishii  urcs,  and  people 
all  laid  on  tiuTii  a  more  or  less  heavy  hand.  There  seems  io 
})e  little  doubt  that  they  wer(!  contrary  to  the  unwritlen 
common  law  which  dderniines  so  many  of  our  rights. 
Their  existence  was  fre(piently  declared  as  being  against 


What  is  a  Trust  ?  23 

pul)lic  policy.  Tlio  ni<isscs  thought  that  at  every  oppor- 
tunity the  trusts,  Ishniael-likc,  raised  their  hands  against 
every  man  and  op})ressed  and  extorted.  Ishniael-likc,  the 
trusts  found  every  man's  hand  raised  against  them.  Con- 
tracts in  restraint  of  trade,  contracts  whose  purpose  is  to 
kill  all  competition, contracts  to  raise  prices  arhitrarilyor  to 
li]nit  production  arhitrarily  so  that  prices  as  a  result  will  ho 
raised,  have  from  time  immemorial  heon  considered  by  our 
J'higlish  common  law,  independently  of  statute,  as  against 
ptiblie  ])olicy,  as  therefore  null  and  void  between  the 
parties  to  tlnMu,  and  as  giving  neither  of  the  parties  any 
rights  thereunder  or  any  remedy  for  injuries  that  he  may 
sustain  by  the  other's  breach  of  the  contract.  This  is  a 
fair  summary  of  the  general  state  of  the  law  on  this  point, 
allhough  not  inl'recpienl  ly  judges  have  laid  down  the  rule 
that  only  contracts  utircdHonabhj  restraining  trade  or  uii- 
rcasondhJij  preventing  com[)etition  were  thus  null  and  void 
and  unenforceable.  Popular  fear  of  these  combinations  in 
many  states  has  enacted,  in  recent  years,  special  statutes 
making  such  contracts  not  only  unenforceable  and  null  and 
void  between  tlie  parties,  but  making  them  criminal,' and 
prescribing  lines  and  imprisonmeiit  for  those  who  arc 
parties  to  them.  Thus  the  condition  of  the  trusts  was 
more  or  less  precarious.  Even  if  they  succeeded  in  the 
.suits  brought  against  them,  they  were  almost  sure  to  be 
liarassed  by  suits;  and  litigation  is  expensive  even  for 
millionaires  and  trusts.  To-day  tliere  is  probably  not  a 
trust  of  any  importance  in  existence.  They  are  gone  like 
the  buffalo  and  the  Indian.  JNu'Iiajts  they  tied  from  fear 
like  the  bu(Tnl(\  but  more  likely,  like  the  Indian,  they  gave 
place  to  something  that  was  (from  the  producer's  stand- 
point) better. 

Xot  oidy  were  th.e  genuine  frusis  of  doulitful  legality, 
they  Averc  not  of  perfect  e!j!ciency.     They  were  corabina- 


24  The  Trusts 

tions  which  were  liable  to  be  disintegrated  independently 
of  decrees  of  dissolution  made  by  courts  in  suits  brought 
against  them.  They  were  temporary;  they  were  tenta- 
tive. The  great  producers  who  had  experienced  the  bene- 
fits of  a  concentration  of  effort,  capital,  ability,  and  experi- 
ence, saw  a  way  of  more  permanently  and  more  securely 
obtaining  these  benefits  by  means  whose  legality  was  less 
questional)le;  namely,  by  the  great  corporation, — the  cor- 
poration which  should  buy  out,  merge,  or  consolidate  all 
the  others  engaged  in  the  industry, — the  corporation  of 
corporations.  Sometimes  the  great  merging  corporation 
bought  the  stock  of  the  several  smaller  corporations.  The 
smaller  corporation  then  continued  in  existence,  but  its 
stock  was  held  not  by  individuals  but  by  the  great  consoli- 
dating corporation.  Yet  since  many  states  did  not  per- 
mit one  corporation  to  buy  the  stock  of  another,  more 
frequently  the  new  corporation  bought  not  the  stock  of 
the  others  but  their  property.  The  affairs  of  the  little  cor- 
porations were  wound  up.  Instead  of  many  concerns  being 
conveyed  in  trust  to  be  managed  by  trustees  for  the  com- 
mon benefit  of  many  owners  who  still  had  a  beneficial  title 
to  their  separate  and  distinct  properties,  we  have  in  the 
case  of  a  consolidated  corporation  one  great  concern,  owned 
absolutely  by  its  shareholders,  which  has  bought  up  all  the 
title,  legal  as  well  as  equitable,  of  the  several  concerns 
which  compose  it.  It  may  have  as  its  shareholders  the 
very  same  persons  who  owned  the  several  distinct  plants 
it  has  bought  out;  possibly  their  interests  in  the  new  cor- 
poration may  l)e  in  exactly  the  same  proportion  that  the 
value  of  their  respective  properties  Ijore  to  the  aggregate 
value  of  all  the  merged  properties.  Several  of  the  trusts 
have  reorganized  as  corporations,  and  the  liolders  of  the 
trustees'  certificates  have  exchanged  them  for  certificates 
of  stock,  dollar  for  dollar;   still  the  general  effect  of  legal 


What  is  a  Trust  ?  25 

decisions  is  that  the  new  corporation  is  not  in  law  a  com- 
bination of  separate  interests;  and  that  the  parties  who 
liave  sokl  their  interests  to  tlie  new  corporation,  even 
thougli  they  take  stociv  in  it,  have  not  made  a  contract  in 
restraint  of  trade.  As  a  matter  of  fact  they  act  together 
more  harmoniously  and  unitedly  than  they  did  before;  but 
in  a  corporation  the  individuals  are  no  longer  considered  as 
acting;  the  corporation  is  said  to  act, — not  its  members. 
]^lost  of  the  great  industrial  combinations  of  the  day  are 
corporations.  None  of  them  are  trusts  proper.  We  still 
call  them  '"  trusts,''  but  they  are  a  different  means  of  ac- 
complishing the  same  purpose.  A  great  corporation  which 
buys  out  the  properties  of  other  corporations,  even  though 
it  does  so  for  the  purpose  of  stopping  competition  which 
has  been  rife  among  them,  is  no  more  a  trust,  in  the  correct 
sense  of  the  word,  than  a  leech  is  a  lancet.  Years  ago  the 
leech  was  used  to  bleed  sick  patients;  nowadays  the  in- 
strument for  that  purpose  is  the  lancet.  A  few  years  ago 
the  trust  was  one  of  the  means  of  stopping  undue  competi- 
tion, of  obtaining  for  the  producer  some  of  the  benefits  of 
combination,  of  practicing,  in  not  a  few  cases,  some  of  the 
extortions  of  centralized  power,  and  of  bleeding  the  com- 
munity. To-day  the  most  common  means  employed  for 
this  end  is  the  great  corporation. 

The  diiference  between  the  genuine  trust  and  the  con- 
solidated corporation  is  more  than  a  diiference  of  name. 
The  one  word  is  not  strictly  the  synonym  for  the  other. 
They  are  not  the  same  thing.  They  may  have  inany  pur- 
poses in  common,  alfect  the  same  j)ers(.)ns  and  interests, 
and  eifect  similar  results;  but  they  are  different  in  their 
creation  and  diifert'iit  in  their  rights  and  liabilities  before 
the  law.  Eeonomically  and  industrially  they  may  be  to  a 
great  extent  flic  saitie  thing:  legally  they  are  different. 
Decisions  of  the  court  applicable  to  the  one  have,  at  the 


26  The  Trusts 

most,  only  a  modified  application  to  the  other.  Statutes 
that  condemn  the  one  do  not  necessarily  concern  the  other. 
It  is  far  more  than  a  quibble  to  say  that  trusts  proper 
differ  from  great  consolidated  corporations.  The  percep- 
tion of  this  fact  is  absolutely  necessary  to  a  right  under- 
standing of  the  problem  which  industrial  combinations  in- 
volve, and  to  any  successful  attempt  to  solve  it. 

It  is,  however,  by  no  means  to  be  inferred  that  all  indus- 
trial combinations  to-day  are  corporations,  notwithstand- 
ing the  popularity  of  that  form  of  organization.  Scarcely 
any  of  them  are  trusts  in  the  strict  legal  sense.  There  arc 
combinations  innumerable — many  of  them  gigantic  and 
230werful — which  are  neither  trusts  proper  nor  corpora- 
tions. They  are  representatives  of  earlier  types  of  com- 
binations. It  has  been  conservatively  estimated  by  care- 
ful students  that  there  are  at  least  live  hundred  pools  and 
associations  and  combinations,  not  incorporated,  whose 
field  of  operations  is  so  extensive  that  from  the  standpoint 
of  the  consumer,  who  is  apt  to  consider  only  their  influ- 
ence on  prices,  they  are  perhaps  as  effective,  obnoxious,  and 
injurious  as  the  greatest  consolidated  corporations  may  be- 
come. Besides  these  great  ones  an  infinite  number  of 
small  ones  exist.  There  is  hardly  a  city  in  which  those 
engaged  in  some  one  or  more  branches  of  business  are  not 
combined  or  pooled  or  associated.  Physicians  frequently 
have  their  regularly  prescribed  jirofcssional  fees;  the  drug- 
gists, wholesalers  and  retailers,  have  associations  innumcr- 
al)lo  that  fix  prices  and  terms  of  credit.  This  is  equally 
true  of  the  wholesalers  in  most  lines  and  of  many  retailers. 

These  coinhinations,  associations,  and  pools  differ,  how- 
ever, from  trusts  proper  and  from  great  corporations  not 
only  legally,  but  economically  and  industrially.  Many  of 
these  combinations,  big  and  little,  and  esj)ecially  the  little 
ones  in  their  liinited  fields,  j)reseiU  the  evils  of  trusts  in 


What  is  a  Trust  ?  27 

an  ap^ijravatcd  niaTiner  in  nearly  every  respect,  and  on  the 
other  hand  oll'er  few  ol'  the  ecoiioiiiic.  a«lvanta;,^e:i  to  those 
interested  directly  in  them,  and  present  hut  i'ew  possihili- 
ties  ot  '^oi){\  to  the  coninmnity.      'i'he  underlying  purpose 
of  all  these  unincor])orated  ])ools  and  associations  and  coni- 
l)inati')ns — in  fact,  it  may  fairly  he  said,  the  almost  sole 
])urpose    is    to    eliminate    competition    and    raise    prices. 
This    is    also    the    chief   purpose    of    trusts    and    corpora- 
tions   of    all    kinds.      Le,<:ally,    however,    the    comhina- 
tions.     to     wlii(-h    refereiice     is    made,     diifer    from     the 
consolidated   corporations  in  that   the   ])ools  and  associa- 
tions  and   comhinations    leave    each    concern    wliich    is   a 
partv  to  them,  se|)arate  and  ilistinct;  and  the  combinations 
are   based  upon   a,i:i'eem(-nis  express  or  implied,  made  by 
individuals,  while  the  coi'])oi'ations  are  new  eiitities,  crea- 
tui'es  of  the  State,  su'iject  to  control  and  regulation  by  the 
State.       They   diifer  from  the  trusts  proper  in   that   the 
several  owners  of  the  p,ropertics  in  condjinations  still  re- 
tain the  legal  as  well  as  beneficial  ownership.      Economi- 
cally and   industrially,  "agreement""   combinations  differ 
from  both  the  cor])orations  and  trusts  ])roper  in  that  there 
is  still  separate  and  distinct   prodr.ction  and  distribution. 
In  many  of  them,  very  few,  if  any,  of  the  economies  of 
producti(m  and  distriluition,   which   result  from   combina- 
tion, ar(>  attempted,      'idiis  is  true  of  those  whose  onlv  aim 
is  jtrice  (ixing.      In  thtve  iliere  is  still  the  maiiitenance  of 
a  numbei-  of  S(>parate  plants,  the  same  old  expenses  of  sales- 
men, of  advertising,  and    of   di.-t rihiil ion   over  the   whole 
held  from  each  and  every  ]>oint  of  production. 

Sometimes,  howc\('r,  the  associations  go  farther  than 
merely  to  fix  prices.  1'lu\v  attempt  to  cut  olf  some  of  these 
wastes  occasioned  by  competition.  Tlius  tlie  enormous 
ex]Hms(»  of  soliciting  a  fi'eiglit  trrdbc  which  niav,  bv  .-uch 
soliciting,  1:)C  diverted  i'roiu  oiie  railroad  to  another,  but 


28  The  Trusts 

which  cannot  be  increased  in  aggregate  amount,  and  which 
is  sure  to  be  eventually  carried  at  a  loss  if  the  warfare  of 
competition  begins,  caused  railroads  to  form  pools,  and  to 
agree  on  what  amount  of  freight  should  be  apportioned  to 
the  several  lines  constituting  the  poo.1,  and  to  endeavor  to 
send  the  freight  in  that  way  and  in  that  proportion,  and 
to  pay  each  line  its  agreed  share,  even  if  the  traffic  did  not 
follow  the  prescribed  route.  Eates  were  thus  maintained 
and  j)rolits  secured.  The  roads  were  able  to  make  great 
savings  in  this  way.  The  anthracite  coal  companies  (for 
nearly  the  whole  anthracite  coal  mining  business  is  now 
in  the  control  of  seven  railways  which  run  through  the  ter- 
ritory where  the  mines  are  situated),  to  cite  another  ex- 
ample, have  formed  a  pool,  and  each  month  they  agree  on 
selling  prices,  regulate  and  limit  the  production,  deter- 
mine the  proportion  to  be  mined  by  each  company,  estab- 
lish or  substantially  determine  prices  to  be  maintained 
by  tlie  local  dealers,  and  fix  uniform  rates  of  wages  and 
regulations  for  mines.  In  these  ways  they  make  some 
savings,  but  the  principal  effect  is  to  maintain  prices. 
Other  combinations  save  some  of  the  expense  of  competi- 
tion by  parcelling  out  the  market  so  as  to  make  it  unneces- 
sary for  each  one  to  maintain  a  separate  establishment 
therein.  Armour,  Swift,  Hammond,  and  Morris,  the  "  Big 
Four  •'  of  the  Chicago  meat  packers,  are  popularly  sup- 
posed to  have  an  understanding  v/hereby  they  do  not  inter- 
fere with  each  other  in  certain  localities  and  markets.  The 
price  to  be  paid  for  cattle  or  charged  for  meat  ])y  all  of 
them  is  fixed  each  day,  although  tliere  is  no  known  ex- 
press agreement  and  certainly  no  formal  coml}ination  be- 
tween then).  But  their  "friendly  agreement,'^  their  "un- 
derstanding Ijctween  gcntlemeu,"'  or  whatever  it  l)e,  is  able 
to  exercise  a  most  cfreclive  control  on  the  cattle  and  meat 
industry   of   the   whole   continent.       They   conduct   their 


What  is  a  Trust  ?  29 

business  individually,  but  act  in  unison  in  many  matters. 
Independent  butcliers  have  been  practically  annihilated. 

It  is  not  known  that  either  the  anthracite  coal  pool  or 
the  "Big  Four"'  in  ihe  meat  business  have  any  express 
agreement;  but  sometimes  the  understanding,  or  the 
resolutions  ot  "  combines,"  as  to  })rices,  production,  and 
wages,  are  formulated  in  writing  and  made  a  written  agree- 
ment. Not  infrequently  penalties  are  imposed,  or  an  as- 
sessment upon  each  person  is  made  and  afterwards  it  is  re- 
distributed to  those  who  do  not  violate  the  agreement. 
The  agreements  of  most  of  the  wholesalers'  associations  as 
to  minimum  prices  to  retailers  are  written  ones  ;  while 
the  many  combinatioijS  in  the  iron  industry  and  among 
the  manufacturers  of  steel  rails  liave  regularly  imposed 
penalties,  and  the  Standard  Envelope  Co.  of  Spring- 
field, Mass.,  was  an  example  of  a  condjination  which  as- 
sessed the  members  according  to  the  amount  of  their  pro- 
duction and  afterwards  rc-distributed  the  fund  among 
those  who  strictly  adhered  to  the  agreement.  Whether 
the  agreements  of  these  various  combinations  arc  written 
or  expressed,  invariably  every  effort  is  made  to  keep  them 
secret.  The  public  never  accpiires  knowledge  concerning 
them  until  some  memljer  violates  the  agreement,  and  the 
fact  conies  to  light  in  the  revelation  tliat  is  sure  to  result. 
For  years  the  insurance  companies  have  had  pools  or  agree- 
ments as  to  ])rciniuiiis;  and  combinations  existed  among 
the  manufacturers  oi'  steel  rails,  nails,  cheuiical  products, 
and  steel  beams,  long  before  tlie  public  was  aware  of  the 
fact. 

The  three  generic  type?  of  combinations,  then,  are  : 
First,  combinations.  ])0()ls.  and  a>sociations  based  simply 
upon  agreements  nuule  by  ])orsons  who  still  continue  as 
individual  owners,  and  which  generally  affect  prices,  but 
sometimes  alfect  output  and  nun  hods  and  scope  of  business; 


30  The  Trusts 

second,  trusts  proper,  in  whicli  the  owners  of  the  several 
properties  transfer  their  respective  interests  to  several  per- 
sons in  trust  to  manage  them  as  one  property  for  the  com- 
mon benefit  of  the  several  owners  according  to  their  pro- 
portionate interest;  third,  great  corporations  whicli  absorb, 
amalgamate,  and  unify  into  one  gigantic  company  various 
small  concerns, — not  infrequently  nearly  all  of  those  en- 
gaged in  one  industry.  Legally,  each  of  these  types  of 
combination  differ  more  or  less  in  form  and  rights  and 
liabilities  from  the  others.  Economically,  the  corpora- 
tions and  trusts  proper  form  one  group — that  in  which 
there  is  a  unity  of  management  and  control — while  the 
several  business  concerns  which  form  mere  "  agreement " 
combinations  continue  more  or  less  distinct  industrially  as 
well  as  legally.  The  different  types  are  mentioned  above 
in  their  chronological  order.  Of  ''•'  agreement ''  combina- 
tions we  even  now  have  many,  but  there  is  probably  no 
existing  trust  in  the  proper  sense  of  the  word.  The  cor- 
poration— the  large  corporation  that  absorbs  all  the  old 
concerns  that  were  formerly  competitors — is  the  latest 
phase  of  combination.  It  is  ihe  form  that  is  to-day  most 
popular  with  those  seeking  to  combine,  not  only  because 
of  its  industrial  advantages  and  its  financial  conveniences, 
but  chiefly  because  it  is  doubtful  if  it  is  illegal,  while  trusts 
and  combinations  are.  It  is  tbe  form  that  is  attracting 
the  attention  of  the  public,  Ijecause  of  its  enormous  size; 
and  it  is  universally  regarded  as  presenting  grave  dangers 
to  industry,  to  society,  and  to  ]il)erty. 

Xeither  the  great  consolidated  cor])orations  nor  the  in- 
numerable combinations  IjusimI  on  agreements  are  trusts — 
using  that  term  with  legal  strictness — much  as  the  people 
may  so  stylo  them.  Still  as  "a  rose  by  another  name  may 
smell  as  sweet"  these  consolidiited  corporations  and  the 
pools,  assuciali<jns_,  and  other  combiiialions  may,  and  in  fact 


What  is  a  Trust  ?  31 

do,  contain  many  elements  that  exist  in  ilie  old  Lui  now 
discarded  trusts.  We  name  some  thin<is  by  their  ajipear- 
ance,  others  by  their  purpose,  others  by  their  results, olliers 
because  of  their  functions,  still  others  because  of  similarity 
to  things  already  named.  Because  of  many  similarities 
between  the  class  of  gigantic  corporations  which  we  have 
described,  and  trusts  proper,  and  pools  or  "  agreement  com- 
bines,'' the  word  "  trust  "  has  become  popularly  applied  to 
all  three  forms.  There  is  no  use  in  cjuestioning  the  pro- 
priety of  this  use  of  the  word.  The  thing  that  is  im- 
portant is  to  understand  what  is  generally  meant  when 
the  word  is  used,  and  also  whether  or  not  it  is  correctly 
used.  A  trust,  then,  as  the  word  is  popularly  used,  may 
be  said  to  be  any  consolidation  or  combination  or  aggrega- 
tion of  a  number  of  concerns  in  any  particular  line  of  busi- 
ness, which,  prior  to  the  combination,  were  naturally  com- 
petitors. It  is  immaterial,  in  the  popular  sense  of  the 
word,  whether  the  combination  is  the  result  of  a  mere 
agreement  between  independent  owners,  or  is  a  corporation 
which  absorbs  them  all,  or  is  a  union  caused  by  a  transfer 
in  trust  of  several  distinct  properties.  The  essential  point 
is  the  union,  more  or  less  formal,  more  or  less  permanent 
and  close,  of  competitive  producers,  with  the  inevitable 
result  of  a  cessation  of  competition  hetireen  them,  and  usu- 
ally with  the  further  result  that  in  a  ten-itory  of  greater  or 
less  extent  no  actual  competition  exists.  Such  is  the 
})opu]ar  use  of  the  word  "  trust."'  But  if  we  would  intelli- 
gently ascertain  the  evils,  and  es])ecially  if  we  would  adopt 
proper  remedies,  it  is  absolutely  necessary  that  we  bear  in 
mind  the  distinctions.  ecf)nomical  and  industrial  as  well 
as  legal,  already  made  between  the  great  corporations, 
trusts  proper,  and  mere  combinations  based  on  agreements. 
The  trusts  proper  wo  may  dismiss  from  consideration, 
because  they  havi',  as  it  were,  dismissed  themselves  out  of 


o- 


cio- 


The  Trusts 


I'lit.  The  experience  of  tlie  courts  and  prosecutin^cr  of- 
ficials ■\vitli  trusts  proper  was  niucli  like  that  occasioned  by 
a  certain  border  settler  in  Missouri  who,  during  the  Civil 
AVar,  lived  between  the  Confederate  and  the  Union  lines. 
When  the  former  pushed  forward  to  his  home,  and  de- 
manded to  know  his  sympathies,  his  reply  invariably  was, 
'^  I'm  a  '  Seceslij"'  When  the  Union  lines  were  advanced, 
his  statement  of  his  position  was  always,  "  Fm  fer  tJte 
Union."  I)ut  once  when  the  pickets  of  the  two  forces  were 
both  hot  after  him,  his  remarkable  declaration  Avas,  ""  / 
ain't  noiliin',  and  miglity  little  of  that.''  When  trusts  were 
assailed  in  courts,  and  the  case  seemed  about  to  go  against 
them,  the  prosecuting  officers  always  woke  up  to  find  that 
there  was  no  trust.  Before  it  could  be  caught  and  brought 
to  justice  "it  was  nothing."'  As  a  trust  it  had  dissolved,— 
disintegrated,  so  to  speak;  but  it  always  happened  that  the 
same  persons,  the  same  properties,  and  the  same  interests 
were  soon  seen  in  the  form  of  a  powerful  corporation  con- 
ducting the  same  enterprise.  It  was  always  a  case  of  "  the 
same  old  business  at  the  same  old  stand; ''  no  change,  in 
reality,  except  a  new  sign. 

But  pools,  associations,  and  "  combines,"  based  upon 
agreements,  like  Thomas  Jefferson,  "  still  survive."  From 
the  way  they  continue  it  even  seems  as  if  we  are  to  have 
them,  like  the  poor,  always  with  us.  They  present  one 
])hase  of  the  problem  of  industrial  combination,  one  that 
not  only  must  be  studied  in  connection  with  the  corj^orate 
phase,  but  also  vicAved  separately;  one  that,  perhaps,  AA'ill 
require  different  treatment.  It  may  be  that  any  attempt 
to  use  the  same  remedy  for  the  evils  of  corporate  combina- 
tions and  combinations  based  upon  individual  contracts  or 
agreements,  Avould  be  as  foolish  as  to  treat  in  tlie  same  Avay 
a  blister  on  i1u'  foot  and  water  on  the  l)rain. 

The  remedies  heretofore  tried  for  the  evils  of  combina- 


What  is  a  Trust  ?  33 

tions  have  so  far  resulted  in  an  increasing  number  of  them 
heing  re-organizetl  as  corporations.  The  problem  of  in- 
dustrial combination,  therefore,  very  frequently,  if  not 
usually,  assumes  the  cor])oratc!  phase. 

The  problem,  then,  is  largely  the  corporation  problem, 
but  it  is  more — it  is  the  great  corporation,  the  consolidated 
and  consolidating  corporation,  engaged  not  in  discharging 
quasi-pnblic  functions  (for  such  combinations  as  railroad, 
traction,  telegraph,  water,  and  gas  companies,  etc.,  should 
be  distinguished  from  purely  industrial  organizations  like 
trusts),  but  in  those  industries  like  manufacturing  and 
trading  wliich,  with  a  certain  degree  of  success,  can  be  car- 
ried on  by  private  individuals.  Furthermore,  the  problem 
of  industrial  organizations  is  one  not  only  of  size,  but  of 
how  that  size  is  obtained;  not  only  of  shapC',  but  of  what 
kind  of  a  shadow  that  shape  is  going  to  throw  over  indus- 
try. It  is  more  than  the  question  whether  or  not  cor- 
porations shall  have,  as  the  limit  of  capitalization,  $1,000,- 
000  or  $10,000,000  or  $100,000,000.  It  is  the  question 
whether  the  corporation  shall  be  allowed  to  buy  out  otlier 
corporations,  to  buy  up  all  the  productive  means  in  any  one 
line  of  business.  It  is  a  question  whether,  notwithstand- 
ing their  gigantic  size  and  enormous  powers,  these  corpora- 
tions are  still  subject  to  economic  laws,  whether  they  are 
affected  by  competition,  and,  if  so,  to  wliat  extent.  We 
ask  not  only  whether  Ca'sar  has  grown  great,  but  '"on 
what  meat  has  this  our  Caesar  fed  that  he  has  grown  go 
great,''  and  above  all  we  want  to  know  whether  the  mighty 
industrial  Ca'sar  is  about  to  proclaim  himself  king  and  defy 
our  rights.  To  a])])ly  a  homely  j)roverb,  it  is  not  merely 
a  question  whether  we  shall  have  big  ilsh,  but  whether  we 
shall  let  the  big  fish  eat  the  litth^  fish.  It  is  well  not  to 
be  deceived  in  this  niaiter  by  mere  size.  A  million  dollars 
of  ca])ital  combiiicil  in  one  industry  may  be  very  injuriinis 


34  The  Trusts 

to  the  people;  twenty  millions  ma}'  only  secure  the  hest 
and  most  economical  productive  means  in  another.  The 
smaller  sum  may  be  sufficient  to  monopolize  one  branch  oi 
industry;  the  larger  may  not  be  able  to  control  the  major 
part  of  another  industry.  Thus,  in  1899,  there  was  a 
Federal  Steel  Co.  owning  many  properties,  and  whose  ag- 
gregate capitalization,  including  bonded  indebtedness,  was 
about  $118,000,000;  and  there  was  being  projected  at 
that  time  the  Xational  Steel  Co.  to  absorb  about  twenty 
plants,  with  a  capital  of  $58,000,000;  and  further  there 
was  in  existence  the  Kepublic  Iron  and  Steel  Co.  with  a 
capital  of  $55,000,000;  and  the  Union  Steel  and  Chain  Co. 
was  forming  with  a  capital  of  $60,000,000;  there  were  also 
the  Bethlehem  Steel  Co.,  of  Bethlehem,  Pa.,  with  a  capital 
of  $15,000,000,  and  the  Cambria  Steel  Co.,  owning  plants 
in  five  counties  of  Pennsylvania,  capitalized  at  $10,000,000, 
besides  several  great  corporations  engaged  in  the  iron  busi- 
ness, and  independent  concerns  of  even  more  enormous 
capitalization  engaged  in  the  steel  business.  On  tlie  other 
hand  it  is  unquestionable  tliat  many  small  industries  have 
lately  come  completely  under  the  control  of  corporations 
having  capitalizations  not  a  tenth  or  a  hundredth  part  as 
large  as  those  of  some  of  these  great  steel-producing  con- 
cerns. 


CHAPTER  III. 

THE    MOTHER    OF    TRUSTS. 

Whex  Topsy,  in  Uncle  Tom's  Cabin,  was  asked  about 
her  parentage,  she  answered:  "  I  duniio,  I  'specs  I  groived.'" 
We  overlook  the  most  important  and  the  really  basic  and 
fundamental  fact,  in  the  investigation  of  trusts,  if  we  fail  to 
ol)serve  that,  whatever  else  may  have  tended  to  bring  them 
into  being  and  to  foster  them  after  birth,  at  least  some  of 
them,  like  Topsy,  ''growcd;"  that  they  are  largely  an  evo- 
lution in  industrial  progress,  notwithstanding  many  of 
them  may  be  mere  excrescences.  Whatever  other  things 
stimulate  their  growth,  at  least  some  of  them  are  the  chil- 
dren, the  natural  offspring,  of  the  competition  which,  since 
man  began  to  exchange  with  man,  has  unceasingly  tended 
towards  larger  and  larger  organizations  of  industry — to- 
wards concentration,  consolidation,  combination,  and  co- 
operation. 

Two  things  are  ever  to  be  borne  in  mind  concerning 
trust>:  first,  that  they  are  gigantic  industrial  organizations; 
second,  that  tliey  are  unions  of  ])ro(lucers  who  were  for- 
merly competitors.  Whether  or  not  they  can  wholly  anni- 
hilate competition  is  the  great  ([uestion.  Time  alone  can 
answer  it;  upon,  that  answer  (lejieiuls  tlu^  solution  of  the 
whole  trust  problem.  But  wliether  we  view  trusts  as  in- 
dustrial organizations  that  arc  simply  gigantic,  or  as  com- 
binations that  have  absorbed  or  will  absorb  all  the  produc- 
tive agencies  of  anv  one  industry  and  that  have  killed  or 


o 


6  The  Trusts 


will  kill  competition  in  that  industry,  it  is  unquestionable 
that  their  origin  is  traceable  to  competition.  Competition 
is,  in  a  sense,  the  mother  of  trusts,  despite  the  fact  that 
Mr.  Havemeyer  of  the  Sugar  Trust,  has,  in  a  moment  of 
bitterness,  charged  that  the  tariff  is  the  maternal  parent  of 
this  brood  of  ill-repute,  and  notwithstanding  the  further 
fact  that  many,  who  have  noticed  the  succor  given  to  trusts 
by  railroad  discrimination,  jDatent  laws,  and  corporate  and 
other  special  2)rivileges,  have  mistaken  wet-nurses  of  trusts 
for  the  real  mother. 

Competition  between  rival  producers  and  distributers — 
plain,  old-fashioned  competition — tends  to  build  up  larger 
and  larger  enterprises,  and  ultimately  to  leave  only  one  or, 
at  most,  a  few  great  producers  in  the  field.  There  are  in- 
deed exceptions  to  this  rule — counter  tendencies — but  the 
proposition  in  the  main  is  correct  and  will  rarely,  if  ever, 
be  questioned. 

The  purpose  of  factories  and  mills  is  to  manufacture. 
The  unceasing  cry  of  the  consumer  is  for  cheaper  commodi- 
ties. The  community,  it  is  true,  has  other  interests  than 
money-making,  than  obtaining  goods  at  low  prices,  than 
getting  as  much  as  possible  in  return  for  a  little.  Social  and 
political  questions  complicate  themselves  with  economic 
problems.  Still,  in  considering  an  economic  situation  like 
that  occasioned  by  trusts,  the  first  question  to  be  answered 
is:  "  How  can  the  most  of  those  commodities  which  gratify 
our  desires  be  produced  by  the  least  expenditure  of  en- 
ergy?" The  question  of  distribution  follows:  "  How  can 
these  things,  when  produced,  be  enjoyed  by  the  persons 
who  produced  them,  in  proportion  as  they  participated  in 
the  work  of  production?"  In  the  final  answer  it  will  be 
found  that  the  widest  distribution  means  the  largest  pro- 
duction; the  fullest  production,  in  general,  means  the  fair- 
est distribution. 


The  Mother  of  Trusts  37 

It  is  the  rule  rather  than  the  exception  that  trusts  pro- 
duce more  cheaj)ly  than  the  indivi(kial  producers  whom 
they  displace^  aiul  therefore  they  can  make  the  cost  to  the 
consumer  less  than  tlieir  individual  competitors  can.  The 
cost  of  an  article  to  tlie  consumer — its  ordinary  retail  sell- 
ing price — depends  not  only  upon  the  expense  of  making, 
but  of  marketing  it.  '^^Fhe  great  industrial  combinations 
cheapen  their  ])roduct  not  only  by  lessening  the  cost  of 
making  luit  infinitely  more  by  saving  expenses  in  market- 
ing. 

The  best  established  fact  in  industrial  history  is  that 
concentration  of  ca])ital  in  productive  industry  has  ever 
meant  increased  eiiicieiicy  in  producing  wealth, — a  cheap- 
ening of  products.  It  is  concentrated  wealth  that  has  made 
possible  our  great  factories,  our  great  railroads,  and  all  the 
great  iiidustrial  agencies  which  have  done  so  much  to 
create  and  cheajien  weahh  and  to  give  to  us  the  comforts 
and.  conveniences  of  modern  civilized  life.  Those  nations 
that  have  encouraged  the  concentration  of  capital  are  the 
most  prosperous;  while  the  greatest  cheapening  of  products 
has  l)een  in  the  industries  in  which  concentration  is  possi- 
ble. The  exhaustive  study  into  prices  made  a  few  years 
ago  l)y  the  V.  S.  Senate  Committee  showed  that  within  a 
generation  the  prices  of  the  uiost  important  manufactured 
articles  (those  ]U'oduced  in  industries  in  whicli  coml)ina- 
tion  and  centralization  are  ]n-actieable)  had  greatly  de- 
creased, but  tlie  ])riees  of  the  ])ro(luets  of  agriculture  (in 
which.  c;:pital  cannot  ])v  ;idvantageously  concentrated)  had 
iner(>ase(L  Tlu>  specialization  of  labor,  the  introduction  of 
machinery,  the  combination  of  etfort,  the  concentrati(ui  and 
consolidation  of  cjijiital,  ha\(^  ahvays  in  the  ])ast  been  un- 
inistakabh'  signs  of  cheajier  and  moi'e  abundant  production. 
These  things  cain(>  fi'oni  the  (h'liiaud  for  cheaper  commodi- 
ties.     Tlu'V  remained,  for  a  time,  because  thev  served  the 


38  The  Trusts 

coramnnity  bettor.  They  remained  till  displaced  by 
greater  specialization,  newer  machinery,  further  concentra- 
tion, larger  consolidations. 

The  demand  for  lower  prices  first  led  to  the  division  of 
labor.  Men  ceased  to  endeavor  to  supply  all  their  wants, 
because  they  found  that  by  each  one  doing  that  for  which 
he  was  best  fitted  they  could  produce  a  greater  aggregate 
and  an  increasing  variety,  and  by  exchange  each  could  get 
more  things  for  the  same  expenditure  of  energy,  that  is, 
get  them  cheaper.  The  extreme  specialization  that  we  see 
to-day  in  professional,  as  well  as  industrial  life,  is  but  a 
further  division  of  labor;  and  the  end  is  not  yet.  Ths 
purpose  of  it,  the  result  of  it,  is  to  produce  at  a  less  cost,  to 
render  services  more  cheaply.  The  division  of  labor  made 
possible  the  invention  of  maciiinery,  which  is  only  another 
answer  to  the  demand  for  cheaper  commodities.  But  the 
greater  the  division  of  labor  the  more  necessary  it  becomes 
that  men  should  co-operate,  and  the  adoption  of  machinery 
usually  necessitates  tlie  bringing  together  of  a  large  num- 
ber of  men  into  one  enterprise.  There  are,  it  is  true,  ex- 
ceptions to  this  rule.  Invention  is  sometimes  a  centrifugal 
force.  It  is  not  always  centripetal.  It  occasionally  decen- 
tralizes rather  than  centralizes.  Thus  not  infrequently 
machinery  is  invented  tliat  makes  l)ut  a  part  of  some  article 
and  tluit  cannot  be  used  profital)ly  by  each  producer  of  tlie 
article,  and  the  result  is  that  a  new  industry  springs  up  for 
tlK-  manufacture  of  this  part.  This  tends  to  detach  from 
the  old  Imsiness  what  may  be  called  a  branch  of  it,  and  to 
make  two  business  industries  where  fornKM-ly  there  was  but 
one.  But  usually  concentration  of  capital  is  required  to 
purchase  now  machinery  that  is  invented,  and  the  concen- 
tration of  more  capital  is  required  to  run  it  jn'ofitably.  A 
little  caj)ital  willi  machinery,  like  a  little  le«rning,  "is  a 
dang(,'rons  thing. "'  but  macdiinery  with  suilicient  capital  has 


The  Mother  of  Trusts  39 

always  meant  choa])er  production  tlian  \va?  possible  })y  the 
means  that  it  di<place(L  The  more  eom])lex  and  intricate 
that  maeliiner}'  is,  the  irriMter  is  tlie  division  and  subdivi- 
sion of  hibor.  Few  men  now  mal<(^  shoes,  but  thousands  of 
men  cut  u[)pprs,  otiier  tliousands  mal-;e  heels  for  shoes, 
other  thousands  pep^  the  soles.  The  p;reater  tlie  sul>- 
(]i vision  of  hibor.  tlie  more  the  necessity  of  co-operation  and 
(jrneralh/,  a/lhouf/Ii  not  (ihrai/s,  the  p'realer  the  necessity  that 
a  larger  number  of  men  be  brou<4-ht  lop'cther  in  one  enter- 
jirise.  I'liis  means  o-reater  concentration  of  capital,  larger 
combination  of  industry. 

A  more  abundant  and  cheaper  product  has  T)een  the  gen- 
eral result  of  all  past  industrial  cond)ination.  This  has 
])ecn  the  iiniforni  e(Hir<e  of  industrial  history.  Capital  luis 
cond)ined  because  the  denumds  of  business  seemed  to  neces- 
sitate it.  ]t  did  not  combine  for  the  fun  of  the  thing.  It 
stayed  combined  a>  long  as  business  l)y  yielding  profits  madio 
it  advantageous  so  to  do.  livery  labor-saving  machine  and 
every  invention  and  improvement  has  refpiired  iiew  capital, 
and  the  im])ortant  inventions  have  required  tiie  ca])ital  of 
many  persons  in  union  :  but  the  ])roduct  has  b(^en  cheap- 
ened. It  not  o!ily  has  cost  h^ss.  l)ut  it  has  sold  for  less. 
From  the  monunii  in  industrial  hi-tory  when  men  heiran  to 
exchange  their  ])rnducts,  the  inov(MmMit  towards  concentra- 
fion  of  efiVrt  and  coitdiinal  ion  of  capital  ha-  been  pro- 
gres-;iv(\  The  advanci^  has  Ixmmt  in  a  geometrical  ratio.  It 
is  duQ  lo  that  instiiu-t  in  human  nature  which  lies  at  the 
foundation  of  (H'onomics  which  is  the  l)asic  ])rinci]de  of 
ex(diange.  namely,  fn  ;j;cl  as  much  as  pos-ible  in  return  for 
as  little  as  |)Oisii)h'.  Tt  is  due  to  the  fact  that  big  producnn'S 
are  generallv  cheap  ]>r()ducers. 

!N"ot  oidy  does  industrial  history  show  that  great  business 
organizations  have  b(^en  cheap  producers,  but  in  the  vcrv 
nature  of  things  the  cheap  is  the  big.  the  cheapest  is  sure 


40  The  Trusts 

eventually  to  become  the  biggest,  and  the  biggest  has  a 
tendency  to  become  and  to  continue  the  cheapest.  Every 
one  wants  to  get  goods  cheap.  The  person  or  organization 
of  persons  who  will  sell  most  cheaply  will  be  tlie  one  patron- 
ized. He  who  sells  most  cheaply,  sells  the  most;  he 
naturally  tends  to  become  the  biggest  trader,  lie  who  can- 
not sell  as  cheaply  as  his  competitors  is  bound,  in  time,  to 
lose  his  trade  and  to  be  forced  out  of  business,  unless  he 
discovers  some  new  way  of  cheapening  his  wares.  If  he  is 
forced  out  of  business,  the  usual  result  is  that  the  big  com- 
petitor, Avho  is  generally  the  cheap  seller,  gets  his  trade 
and  becomes  a  bigger  competitor,  with  a  bigger  trade;  and 
it  is  also  generally  true  that  by  the  failure  of  the  weaker 
competitor,  and  his  own  consequent  increase  in  trade,  the 
large  competitor  becomes,  to  a  certain  degi'ee,  a  still 
cheaper  seller;  for,  with  coinparatively  few  exceptions, 
large  undertakings  can  be  conducted  at  a  less  cost,  in  pro- 
portion to  the  business  transacted,  than  can  small  ones; 
and,  further,  the  same  percentage  of  profit  from  a  large 
enterprise  as  from  a  small  one  may  enable  the  owner  of  the 
large  one  to  make  enough  to  live  in  comfort  and  affluence, 
while  the  owner  of  the  small  one  may  obtain  so  little  that 
he  may,  perhaps,  lack  life's  necessities.  The  larger  the 
business  transacted,  the  smaller  the  percentage  of  profit 
necessary  to  its  success. 

Competition  is  impossible  without  competitors;  yet  if 
there  is  a  struggle  of  com])etition  among  a  given  number, 
eventually  one  must  prevail.  But  it  will  be  asked:  "Is  it 
not  a  fact  in  industrial  history  that  there  arc  always  new 
competitors  sin'inging  u])? ''  It  is.  New  competitors  will 
s])ring  up;  but.  as  a  rule,  the  new  competitors  are  larger 
com])etit()rs  than  tliose  tliat  have  been  vanquished.  Tf  not 
so  at  first,  tlu'y  soon  become  so.  Com])etition  generally  is  a 
process  of  constant,  steady  cliniii^'itiiui.     Tlie  winner  in  the 


The  Moihcr  of  Trusts  4I 

>tni,i:-u-lL'  will  1)(.'  lie  who  gives  the  most  for  the  money.  This 
per-i  u  will  lie  the  liisi  to  SfU  his  ])roduct  and,  in  so  far 
as  he  caji  >-u;){)]y  the  entire  demand,  ihe  others  will  havi 
no  n!arl:et  and  mu^t  go  out  of  business.  Assuming  that  a 
small  jiroducer  (-(luld  hy  some  laljor-sa\-ing  machine  produce 
mure  chcai)iy.  ii  would  be  only  a  short  time  before  he  would 
have  hi.-  compclilor's  trade  and  become  the  large  producer. 
But  with  the  increased  trade  that  would  come  as  a  result 
of  tlie  cheaper  production  by  this  new  machinery,  there 
wotild  also  come  increased  ca])ital, — either  accumulated 
prolits,  boiTOwed  cajntal,  or  associated  capital.  It  would 
come  because  it  would  be  an  ab.-olute  necessity  to  cai'ry- 
ing  (111  the  increa-ed  ti'ude;  it  would  come  also  as  a  I'esuit  of 
the  busiiie-.-.  A^  M)iiii  a>  the  little  pi'uducer,  w!ii)  got  C(ni- 
irn]  of  the  l;!bM!'--a\i!ig  itincliiiie  or  pi-oce^s,  became  the 
Lirge  prodiieei',  his  ])osiiioii  would  uiupiestionably  be 
st!!.!';ier  u!u;  his  ability  lo  produc-e  clieajtly  would  be  in- 
creased. 
•^  !n  the  .struggle  of  competition  it  is  always  the  weakest 
th;it  is  trodden  under  foot,  and  it  is  genei'ally  the  smallest 
ii^at  is  rlie  weake.-t.  The  process  is  continuous  and  cumu- 
;;'t:ve.  'I'lie  little  goes  down  before  t:)e  large,  and  liie  large 
ri.-es  above  and.  upon  tl;e  lirtle.  Thi.-  is  not  the  restilt  of 
t!'U.~ts.  It  is  tlu' re>idl  of  competition.  It  i.- not  the  result 
oi'  ti'u-is.  but  it  i>  the  cause  of  ti'u>ts.  The  uiiderlying 
eaiiM'  is  that  irre.-istible  foi'ee  thai  lu!s  nm'er  yet  ceased  and 
jirobabiv  nevei'  will, — iJir  (li'iinnnl  fur  rlicnp  production. 

]>:irge  ]n'0(iiiction  i>  usually  cheap  jiroduction.  The 
large'  con.itietitoi'  h,-is  an  ad\'antage  in  the  struggle.  He  is 
moi'e  apt  to  win  tiian  i,-  his  sniall  ;ind  weak  competitor.  It 
i.-  (iiily  i;n  exemplilieai  ion  (if  nature"-  cruel  law.  the  survival 
of  the  I'liiot:  ;i;id  of  ibo'  i)itiK>s  ecoiioniie  law:  "To  him 
til, it  r,a;li  .-hall  be  given,  and  from  him  tb,;;i  jiath  nor  shall 
be  taken  e\en  liiai  wiueli  he  hatli  ";   and  of  iluil  dogma  of 


42  The  Trusts 

social  despair,  "  The  destruction  of  the  poor  is  liis  poverty." 
Thank  God  that  there  are  exceptions!  Yet  we  can  make 
no  progress  without  recognizing  the  stubborn,  though 
cruel,  facts. 

Why  are  the  largest  producers  usually  the  cheapest?  Be- 
cause they  can  Avith  their  great  capital  obtain  the  most  im- 
proved machinery,  bring  together  the  largest  force,  secure 
the  best  talent,  spend  the  greatest  sums  in  experimentation, 
utilize  waste  products,  develop  new  markets,  weather  the 
storms  of  financial  panics,  oifer  the  most  favorable  terms 
to  purchasers,  transact  the  largest  business  (and  therefore 
be  content  with  a  smaller  percentage  of  jorofit).  As  a  re- 
sult of  all  these  things  they  produce  and  profitably  sell  at  a 
small  amount  per  unit  of  product.  The  business  enter- 
prises thus  equipped  are  reasonably  sure  in  the  struggle  of 
competition  to  overcome  their  weaker  competitors.  The 
natural  law  of  political  economy  is  for  the  large  to  become 
larger,  because  the  large  is  usually  the  cheap.  Our  old 
time  competitive  system  leads  naturally  up  to  huge  indus- 
trial enterprises.  Bigger  and  increasingly  bigger,  then,  is 
the  usual,  normal,  and  natural  tendency  of  industrial  enter- 
prises. Its  cause  is  the  demand  for  the  cheaper  and  the 
increasingly  cheaper;  its  result  is  cheapness,  which  itself 
results  in  greater  bigness,  and  this  again  causes  further 
cheapness.  Bigness,  cheapness,  greater  bigness,  further 
cheapness, — this  has  been,  is  now,  and  always  will  be  the 
normal  tendency  and  movement  of  economic  and  industrial 
progress. 

Competition,  then,  unrestrained  and  left  to  its  natural 
course,  tends  finally,  but  tends  normally,  towards  the  ex- 
tinction of  the  small  and  weak,  and  towards  tlie  survival 
only  of  tlie  large  and  strong.  Cireat  industrial  organiza- 
tions are  the  logical, incvitable,and  ultimate  results  of  com- 
petition.     The  formation  of  trusts,  whose  avowed  purpose 


The  Mother  of  Trusts  43 

is  to  save  competitors  fi-oni  tlcfcat  in  the  war  of  oompcti- 
tioii,  as  will  be  seen  later,  is  vei'V  often  only  a  sliort  cut 
to  this  goal,  it  is  tlie  throwing  up  of  the  s})onge  in  the 
early  rounds  ol'  the  light  before  the  knock-out  blow  conies, 
oil  condition  that  the  conijielitor  who  is  nearly  "  winded'' 
shall  receiNc  a  part  of  thu  gate  UKUiey. 

It  is  a  fad  ot  coininon  eveiw-day  knowledge  that  under 
our  present  condition  of  industi'v,  as  soon  as  one  man  is 
known  to  be  engaged  in  a  money-making  business,  great 
ntimbers  of  others  engage  in  it,  lured  by  the  prospect  of 
immense  jjrofits.  There  is  a  iiell-mell  rush  to  start  in 
that  business.  Ivtcli  aims  to  supi)ly  the  whole  nuirket. 
Each  introduces  machines,  processes,  and  methods  of  organ- 
iza.tion  designed  to  cheajien  the  ])ro(luct  so  as  to  l)e  able  to 
undersell  his  competitors.  I'he  lower  tlic  price,  tlie  greater 
is  the  necessity  of  a  large  out])ut  in  order  to  reap  an  ade- 
quate aggregate  profit.  The  larger  the  output,  the  more  it 
is  necessary  to  reduce  tlie  ])rice  in  order  to  sell  the  product. 
The  farther  this  proceeds  the  more  aggravated  the  situation 
becomes.  Competition  is  first  active,  then  intense,  then 
bitter,  then  destructive,  finally  self-destructive.  In  the 
end  we  are  confronted  with  over-])roduction  and  shut- 
downs; cut  prices  and  sacrifiee  sales;  de])rcssion,  stagnation, 
and  bankruj^cy.  Wlien  this  excessive  com]>etition.  like  a 
fever,  has  run  its  fi;ll  course  those  who  liave  been  able  to 
surviv(\,  combine,  f(U'mal!y  or  informally,  tacitly  or  openly, 
to  regulate  the  production,  in  order  to  make  it  com- 
mensurate with  the  (hunand  and  to  obtain  prices  that  will 
yield  at  Ica-t  fair  jtrofit.  Trusts,  and  the  great  corpora- 
tions commonly  cabed  trusts,  are  forms  of  combination  for 
this  ]nir])ose.  "'  fjow  prices  "  is  the  popular  cry.  Trusts 
are  the  means  \]>0i]  to  comply  with  the  request.  Trusts 
are  inevitalilc  because  the  deiii;;!vl  of  the  consuming  public 
for  lower  prices  is  an  insatiable  appetite.      It  is  sure  to 


44  'jl'Iic  Trusts 

gnaw  away  profits,  until  a  time  comes  when  for  a 
season,  at  least,  it  no  longer  pays  some  of  the 
producers  to  produce.  To  avoid  seemingly  impending 
ruin  they  unite  witlr  their  competitors,  and  a  trust  is 
formed  to  escape  destruction  in  a  warfare  which  others 
have  largely  urged  on.  Competitors  figlit  for  marlvcts  like 
dogs  wlrich  the  consumers  set  on  with  cries  of  ^  sic  'em." 
Not  infrequently  the  contest  ends  for  the  combatants  lik^ 
the  famous  Killvcnny  cat  tight,  when  of  tlie  fighters  "  there 
Avas  naught  left  but  the  tips  of  their  tails  and  the  bits 
of  their  nails."  We  do  not  say  that  all  trusts  are  organized 
solely  to  esca])e  the  evils  of  undue  com])etilion,  or  that  in 
every  case  prolits  have  l^een  wliolly  wiped  out;  bul  what- 
ever other  motives  may  have  existed,  the  clianee  to  obtain 
tlie  benefits  of  clieaper  ])roduction,  better  regulation  of  out- 
put to  demand,  and  fair  prices,  has  been  ;;  most  powerful 
motive  in  the  formation  of  trusts.  ^lanv  trusts  have  been 
formed  for  purposes  of  stock  manipulation,  but  frequently 
the  cause  has  been  excessive  competition.  It  has  been, 
"  Trust  or  Bust." 

There  has  always  been  a  tendency  for  industrial  organ- 
izations to  increase  in  size.  It  is  more  marked  to-day, 
iiecause  invention  and  discovery  have  enhu'ged  the  field  of 
business,  strengthened  tlie  competitors,  and  intensified  the 
competition.  The  vastly  imi)roved  means  of  travel,  com- 
munication, and  trans]~»ortation  tend  to  build  up  trusts, 
since  they  tend  to  increase  competition.  When  the  market 
was  limited  by  the  circle  whose  radius  was  the  stage  route, 
competition  was  bounded  by  that  circle.  Outside  of  it,  a 
maker,  although  his  cost  of  ])roduction  was  greater,  could 
nevertheless  find  a  market  and  could  sell  his  goods.  The 
great  expense  of  transportation  by  tliese  primitive  methods, 
when  added  to  ilie  cost  of  produrtion,  often  made  if  neces- 
sary for  the  cheap  producer  to  charge  in  the  relatively  dis- 


The  Mother  of  Trusts  45 

tant  market  a  price  in  excess  of  that  cliargcd  by  some  pro- 
ducer i]i  that  remote  locality  whose  cost  of  actual  produc- 
tion was  much  greater.  Pnit  tran.>])oriatio]i  has  now  be- 
come so  imu-h  im]'rovecl  that  each  ])roducer  is  the  active 
competitor  of  all  others.  When  shoes  were  made  by  hand 
and  the  stage  was  tlie  means  oi  transjjortation  and  com- 
munication, my  local  shoe  coblder  couhl.  charge  me  much 
nu^re  than  a  cobhler  in  Syracuse,  twenty-five  miles  away, 
because  it  would  have  cost  me  much  to  go  to  Syracuse  to 
be  litted,  and  it  would  have  been  quite  an  expense  to  get 
the  shoes  from  Syracuse,  even  if  I  did  not  have  to  go  there 
to  he  fitted,  'bo-day  if  my  cobl)ler  were  to  charge  over- 
much, I  could  buy  from  many  stores  in  my  own  city  of 
Auburn,  X.  Y.,  shoes  nuide  at  l.ynn,  Mass.,  or  Brockton, 
^lass.,  or  at  numy  other  places  luuulreds  of  luiles  away. 
Fifty  years  ago  my  local  cobbler  had  hardly  a  competitor. 
To-day  he  competes  with  all  the  great  shoe  factories 
throughout  the  entire  count  it.  To-day,  to  tell  the  truth, 
my  local  cobl)ler  is  out  of  business,  that  is,  he  is  no  longer 
in  Ijiisiness  as  a  cobblei'.  The  factory-made  shoes  were 
better  and  (.'heaper.  and  we  took  our  trade  from  him.  Ihit 
the  cobbler  has  now  a  place  in  the  shoe  factory  where  he 
p.udves  moi'c  money  than  he  did  years  ago  wiien  he  ])egged 
on  his  own  last.  TIu^  weak  and  struggling  are  no  longer 
to  any  extent  beyond  tlu'  re.tch  of  c-ompi-'tition. 

Although  ini[)ro\'ed  trans])0i'tation  has  int-reased  compe- 
tition, it  has,  neveriheless,  expanded  o])|)oriunities.  The 
prize  is  {)roporlionately  gi'eat.  t'oniraels  for  nuiterial  of 
the  value  of  miHions  are  to-day  iu)t  uncommon.  Trans- 
actions involving  the  amount  of  a  king's  ransom  are  as  fre- 
([tumt  now  as  wovo  those  amounting  to  hundreds  of  dol- 
l:;rs  in  years  gone  by.  Vv'hile  1  ;un  writing  this,  the  even- 
ing j;ai)er  has  been  laid  on  my  de.-k  (A[)i'il  llth,  1!)(M)),  and 
1  read  that  the  -New  W:vk  Ceiitr.il   IJaiUvay  ha>  ju>t  given 


46  The  Trusts 

to  the  Carnegie  Co.  a  contract  for  35,000  tons  of  steel  raih, 
amounting  in  value  to  $1,190,000.  The  business  needs 
and  opportunities  of  the  present  day  are  many  times 
greater  than  before  the  days  of  railroad  transportation, 
telegraph  and  telephone  communication,  steam  power  and 
international  travel.  Business  methods  have  to  keep  pace. 
Concentration  of  capital  is  inevitable;  combination  of  effort 
is  absolutely  necessary.  The  competitors  for  these  great 
trade  opportunities  must  be  immensely  large  and  powerful. 
Great  industrial  corporations  are  the  latest  business  mech- 
anisms for  doing  the  great  business  of  the  world.  They 
are  formed  because  they  can  do  the  work.  To-day  America 
is  reaching  out  for  the  foreign  market.  She  is  winning  it. 
Americans  built  the  Atbara  bridge  in  Egypt.  The  Cramp 
Shipbuilding  Co.  is  turning  out  cruisers  for  Eussia  and  also 
for  Japan;  their  value  is  millions.  Pittsburgh  iron  and  steel 
manufacturers  have  taken  stupendous  contracts  in  China, 
Japan,  Europe,  Australia,  and  Africa.  But  every  nation  is 
a  competitor  for  tliis  foreign  trade.  The  market  for  every 
producer  is  tlie  vrorld.  Every  man  may  strive  to  obtain  it, 
but  the  victory  is  to  tiie  strong.  Xapoleon  uttered  a  his- 
toric truth  when  he  said  :  '"  (jod  fights  on  the  side  of  the 
strongest  liattalions."  In  tlie  migbty  struggle  for  the 
world's  industrial  and  commercial  supremacy  which  has 
already  l^egun,  that  nation  will  win  whose  industries  are 
marshaled  into  mighty  Ijut  perfectly  organized  phalanxes, 
capaljle  of  undertnking  gigantic  industrial  tasks  and  ac- 
complishing tliem  successfully.  The  little  concerns  must 
quail  before  tlie  call  to  perform  such  commercial  duties. 
Comj)etiti(/iK  lu-re,  gives  the  jirize  to  the  strong  and  large. 
CouUl  any  (■(inccrn  with  less  ca])ital  than  one  of  the  great 
industrial  coinbinai  ions,  have  taken  and  filled  a  six  million 
dollar  order  foi-  a  railway  in  Ifussia,  as  lias  been  dcme? 
Could  any  small  concei'n,  aTiything  less  than  a  trust,  fill 


The  Mother  of  Trusts  47 

this  order?  The  great  industrial  organizations  have  come 
into  l)eiiig  Uu-gcly  because  tliey  were  necessary  to  do  the 
enormous  business  that  exists.  Prof.  J.  \V.  Jenks  of  Cor- 
nell rniversily,  one  of  tiie  most  reliable  and  trustworthy 
sources  of  information  as  to  trusts,  is  authority  for  the 
statement  tliat  the  head  of  one  of  the  greatest  industrial 
combinations  had  assured  him  that  his  concern  would 
bring  in  $500,000  in  profits  from  iheir  foreign  trade. 
l\gmy  establishments  do  not  build  up  such  trades.  Fur- 
thermore, not  only  do  these  gigantic  business  corporations 
alone  seem  able  to  deal  with  the  immense  trade  opportuni- 
ties when  tliey  are  presented,  not  only  are  they  the  only 
competitors  who  can  handle  these  big  deals,  hut  competi- 
tion prevents  any  but  big  concerns  from  building  up  sucli 
a  foreign  trade.  It  is  manifest  that  it  will  not  pay  to 
attempt  to  work  up  an  export  trade  unless  it  is  a  large 
one.  It  costs  a  great  sum  of  money  to  introduce  an  article 
into  a  foreign  market.  Only  a  gigantic  business  enterprise 
can  successfully  develop  such  a  market. 

Again,  the  contest  for  the  markets  of  tlie  world  means 
tlie  most  intt-nse  competition  between  the  wage-earners  of 
the  nations,  that  has  ever  been  known.  It  is  the  hardest 
struggle  into  which  American  industry  has  ever  entered. 
A])out  every  nation  to  which  we  export  has  clieaper  labor, 
and  in  order  that  we  may  be  able  to  produce  cheaply  enough 
to  compete  with  jn'oducers  employing  this  cheap  labor,  it 
is  nec^essary  that  the  most  economical  and  labor-saving 
methods  as  well  as  machines  be  employed.  Enormous  capi- 
tal is  necessary,  and  enormous  capital,  well  organized,  can 
overcome  the  comiietiiion  of  cheap  labor.  Take  for  in- 
stance the  Standard  Oil  Co.  and  its  foreign  market.  This 
great  com{)anv  lias  deveUjpt'd  a  foreign  trade  which  brings 
into  tliis  countrv.  t';'i-h  and  evei'v  year,  $()0,000,000  in  golfl. 
Who   will    uhimatelv   obtain    the   markets   of   the    world? 


4o  The  Trusts 

AVhat  is  ir  tliat  will  finally  dotcrniino  tlie  question?  Is  it 
merely  governmental  control?  Is  ir  governmental  do- 
minion? These  may  have  their  influence,  hut  in  the  long 
run  the  determining  factin'  is  tlie  price.  It  is  true  that 
trade  follows  the  flag,  hut  the  greater  truth  is  tliat  trade 
follows  the  price,  and  the  flag  is  cliieily  a  protection  to  the 
trade.  All  the  industrial  countries  of  the  globe,  those  of 
Europe,  America,  as  well  as  Japan,  are  to-day  cijmpeting 
for  the  markets  of  tlie  ^vorld.  The  I'nited  States  can  win 
that  trade  and  hold  it,  for  manufactured  goods,  only  hy 
offering  those  goods  at  as  low  a  ])rice  as  tlieir  luiropean 
and  Asiatic  competitors.  Against  tlie  cheaper  laO')r  of  for- 
eign competitors,  the  Fnitod  States  can  ol)tain  r.nd  hold  liie 
markets  of  the  world  for  manufactured  goods.  Uy  adojuing 
labor-saving  macliinery  and  by  availing  themselves  n(_)t  only 
of  every  ])eriection  of  equi}>ine!U  and  of  process,  but  also 
of  all  th.o  [perfections  of  organization.  This  is  ])ossil)le 
only  tltrough  centralization  of  irulustry  and  aggregation  of 
capital.  Our  raw  materials.  aUhou.gli  jiroduced  l)y  indi- 
vidual efforts,  will  generally  flud  a  market:  but  it  is  most 
significant  that  of  all  our  ex])orts  of  manufaclured  good<, 
eighty  prr  cent  are  beiu;.';  lo-diiy  rroduced  hy  great  indus- 
trial organizations,  wbicli  are.  in  fact.  know]i  as  trusts. 
I;"i  Europe,  esix^ciallv  in  England  and  Germany,  we  find, 
to-dav,  great  as-ociated  cajiital  in  b;;sines-  enterprises. 
Those  nations  will  beat  us  in  tlie  struggle  of  competition, 
unless  we  use  every  method  and  eve^w  means  that  tend 
to  ch.eapcn  our  product  withonr  der-rci^-i'i:^  'hv  wages  of 
emplovef'S.  The  foreign  market  is  absolutely  nece-.-ary 
to  American  industry  and  iirosjierity.  The  productive 
capncitv  of  ihe  labor-savina'  iini)le!nen{s  and  neu'binery 
of  the  I'nited  States  more  th.an  equals  to-day  tliai  of  a 
poiiulalion  of  IdO.ono.dOO  not  using  labor-saving  devices. 
It  is  this  ab.-')lute  need  of  a   foreign   market  in  wliich  to 


The  Mother  of  Trusts  49 

(1i>|ms(>  of  our  ?in'j)Iu>  jiformcls,  and  the  intensity  of  the 
fi)rcig-n  compotilioi!.  thai  \\a\o  led  to  tlicpe  porfcction.s  of 
in(!ii>lrial  o]\nanizations  from  tlie  standpoint  of  produc- 
tion.— the  urt'al  ousiness  eor])oration.s  of  to-day. 

^\'e  will  be  most  foolisli  if  we  fail  to  perceive  clearly  the 
cause  and  me:; us  of  our  industrial  success.  Our  competi- 
tors, wlio  ji^dously  watch  our  every  movement,  have  noticed 
how  wc  suc(,-red.  aiul  are  atteni})tinii:  to  light  u.-  with  the 
i^anR'  instruments.  The  following  from  The  Neic  York 
JlrraJil  of  May  '^-^  1 !»()(),  is  worthy  of  the  most  serious  con- 
siderati(m  hy  vwvy  ])ers()n  who  is  interested  in  the  pros- 
]H'rity  of  the  Aiiicrica.n  manufacturer,  th(>  American  wago- 
eainer,  and  every  one  whose  success  or  welfare  or  prosperity 
is  in  any  way  connected  with  theirs: 

ger:^[.\x  txdx'stries  under  trust  control. 

SC.MUKI.Y    AX     niCOllTAXT    rr.ODI'CT     XOT     IlEGULATED     HY    A 
COMIilXATIOX. 

Syn(licato>  and  trusts  aro  obtaining  control  of  almost  all 
l.MiM'.clics  of  iiulustry  in  (leniiany. 

In  an  arlidc  on  in(iu>trial  and  connnorcial  conditions  in  (Jer- 
TiMiiy.  })}-  (oii-ul-tii'iu'ral  Erank  U.  Mason,  prpjnired  for  the  forth- 
coiiiinu-    \dhniH'    of    i;('l;ition:i    of    the    I'nitcd    Slates.    Mr.    Mason 

'■  In  llic  report  of  this  series  for  1S!)7  tlie  remark  was  made  that 
cs  nil  iitciilinl  iiiid  (■(iiiililinu  (if  (Irniiiniii'.^  pi-rfcct  or(j<iiii:iition 
null  imliiytriiil  (ji-nirtli.  ils  hiulUin  itrodiiclii'i-  iii<htstrif><  IkkI  been 
■'^I'lKlicnh  fl  in  nil  r.rtriil  jirnhiilil  1/  II iikiioirii   in  mil/  other  coiDitri/. 

'■  Wduit  \\a-  tiuf  thfu  i-  still  more  true  to-day.  The  two  hun- 
dred trusts  and  -yndicates  uhieh  were  in  existence  in  (Jerniuny  at 
the  he^'iniiitiLr  of  ISH'J  ayc  iner(Msiii<.r  jn  number  day  by  day,  until 
thci-c  is  M'aiccly  a  ~inL;le  importaiU  product  of  manufacture  of 
whicli  I  lie  output,  priif.  auil  conditions  of  sale  are  not  governed 
liy   a   coiiibiiiat  ion   or   uieh-istandiiig   lictwcen  producers. 

'"One  can  srarccly  ojicu  a  (U'rman  newspaper  without  finding  a 
paragrajih    annoutLcing    a    new    eoniidnation    of    this    kind,    or    an 


50  The  Trusts 

(iriicle  pointing  fo  the  recent  notable  mulliplicati^n  of  syndicated 
industries  in  Enuland  and  the  L'nited  States  as  an  example  of 
what  Germany  should  do  for  self -protection." 

Xot  only  has  the  tendency  to  centralization^  consolida- 
tion^ and  combination  been  caused  in  part  by  the  increase 
in  the  intensity  of  competition  due  to  the  invention  of 
labor-saving,  cheap-producing  machinery  and  to  improved 
means  of  transportation,  travel,  and  communication,  it  has 
been  furthered  by  other  inventions  wiiich  have  increased 
competitive  forces  by  enabling  men  to  exercise  manage- 
ment over  greater  organizations  and  supervision  over  wider 
fields.  Tlie  talent  for  management  has  developed  with 
each  increase  in  the  size  of  organizations,  and  it  has  been 
aided  and  fostered  by  labor-saving  inventions  and  discover- 
ies. The  stenographer  and  typewriter,  the  teleplione  (local 
and  long-distance),  the  telegraph,  rapid  transit,  and 
myriads  of  other  facilities,  have  enormously  multiplied 
the  capacity  of  managers  to  dispatch  business,  and  have 
enrd;k;l  tliem  to  m;in:!ge  and  supervise  more  and  greater 
things.  Tlie  tnodern  means  for  transacting  business 
]ia'\e  made  possiljle  the  consolidation  of  a  muhitude  and 
a  magnitude  of  business  interests  under  one  management, 
wliich  hfty  years  ago  wotild  have  been  physic-ally  impossi- 
Ide.  Competition  is  liercer  to-day  because  each  coni2)etitor 
has  a])plianees  and  methods  tliat  give  to  liini  increased 
(•a])acity  and  power  and  ability.  Would  these  means  ever 
have  been  invented  or  discovered  if  they  were  tiot  to  be 
(,'in])loyed  for  their  natural  ends? 

Com])elition, — which  by  tiu'  way  is  nothing  but  the 
I'eflex  of  that  jiopular  demand  for  (•liea})er  goods,  wliich 
is  as  (•(■as('l('>s  and  as  irresistible  as  the  force  of  gravitalion, 
— has  dictated  not  onlv  the  size  of  industrial  enterj)i'ises. 
the  d(^grec  of  c.'nli'alizat  ion.  and  the  extent  of  eondjinal  inn 
of  elfort.  but   the  manner  and   form.      l''or  a  lows  ilwiv  all 


The  Mother  of  Trusts  51 

enterprises  were  under  indiviihial  owncrsliip,  hut  when 
greater  eoncontration  became  necessary,  ii  could  he  seeuretl 
only  Ijy  a  union  of  capital  and  etl'ort  and  skilL  For 
a  century  the  })ailnership  i'orni  ot  co-operation  ])rcvailc(L 
^J"\v()  or  more  jnen  jf)ined  toge-ther;  l)ut  there  reinained 
individual  liahiliiy  on  the  ])art  of  each  for  all  tlie  dehls 
and  liabilities  of  the  partnership,  regardless  as  to  which 
])ei'son.  in  i'act,  luade  the  contract  or  incui'iH^d  the  liability. 
Each  ])artner  was  liable  for  the  whole  amount  of  the  debts 
ot  the  ])artnership,  and  however  small  a  ])Oi'tion  of  his 
capital  might  have  been  actually  invested  in  the  l)usiness, 
his  entire  fortune,  whether  in  that  business  or  in  another, 
Avas  liable  to  Ije  taken  from  him  in  paymeiit  of  the  dehts  of 
the  firm.  This  rule  of  law  as  to  the  liability  of  ])artners 
naturally  re})i'essed  and  restricted  the  formation  of  })art- 
nerships,  and  prevented  the  concentration  of  wealth  and 
combination  of  eil'ort.  The  natural  limitations  of  human 
endeavor,  and  the  impossihility  for  many  men  to  work 
together  harmoniously  and  advantageously  in  joint  man- 
agement and  control,  were  a  further  restriction  upon  and 
an  impediuient  to  the  success  of  ])artn(  ;'-lii])s.  The  old 
proverb,  '"  Too  many  cooks  spoil  the  1)roth,'*  has  had 
innumtM'able  exemplilieat  i(Uis  in  i)ai'tm'r<li  ij)  enterpi'ises. 
Soon  it  became  recognized  that  some  relief  was  m^cessary, 
tlia.i  Mime  method  of  association  must  be  ])rov!ded  for  by 
law  tli;it  would  enable  men  to  invest  a  por1i(ni  of  their 
Avenlth  in  business  enterprises,  with  their  liability  limited 
accordingly.  SiafuU'S  as  to  s])ccial  ])artnerships  were 
framed,  but  such  staiuics  had  to  be  followed  and  observed 
with  such  technical  c:ire  that  they  never  atl'orded  a  satis- 
fa(-lory  I'elief,  and  never  made  [lossible  that  concentration 
of  capital  which  the  advance  in  industrial  opportunities 
made  necessary.  Some  scdieme  whereby  men  could  invest 
portions  of  their  capital  in  business  enterprises,  whereby 


52  The  Trusts 

tlioy  could  ]nit  thoir  spare  money  in  an  enterprise  -which 
tlioy  themselves  shoukl  not  be  obliged  to  manage  or  con- 
trol, and  with  only  a  limited  liability  for  the  debts  of  the 
organization,  became  necessary.  Men  do  not  like  to  put 
all  their  eggs  in  one  basket.  Many  of  them  want  to  dis- 
tribute their  money  in  dilferent  enterprises  in  order  to 
lessen  the  risk.  Where  many  co-operate  it  is  necessary  that 
a  few  manage  and  direct;  but  to  induce  people  to  put 
their  money  under  the  management  and  direction  of  a 
few,  you  must,  at  least,  assui'c  them  that  only  to  a  limited 
extent  will  they  be  liable  for  debts  which  are  not  of  their 
own  creation.  The  partnershij)  form  of  organization  could 
not  bring  together  enougli  ca])ita].  Its  successor  was  the 
corporation,  ft  was  the  multi])lication  of  inventions,  it 
was  the  wide  expansion  of  the  market,  it  was  the  enlarge- 
ment of  tlie  industrial  world,  tluit  made  tliis  greater  con- 
centration of  capital  necessary  and  that  gave  rise  to  the 
modern  business  corporation.  In  the  struggle  of  competi- 
tion, tlie  partnershi])  with  its  limited  ca])ital,  unlimited 
liability,  and  cumbersome*  luethods,  could  not  do  business 
as  cheaply  as  the  cor])oi'aiIoii.  'I'his  is  what  has  led  to  tlie 
growtli  of  corporations.  Tlie  trusts  of  to-day  are  gigantic 
cor])orations, — corporations  ot  corj)orations.  They  may 
])Ossil)l.y  be  more  than  this,  but  tins  mucli,  at  least,  they 
are.  'I'liere  may  lie,  in  fact,  are,  various  causes  for  their 
formation;  but  this  much,  at  least,  is  certain:  one  cause, 
one  great  cause,  of  tlieir  formation  is  tlieir  economic  su- 
jieriority.  'i'hey  possess  tlu;  power  of  cheaper  and  more 
abundani  ])roduction.  Tn  proportion  as  they  exercise  tlie 
consecpietit  power  rjf  lowering  ])rices,  is  ilie  likelihood — yes, 
the  ))o-sibiIily  of  iluir  coniinuance. 

Com[)et  it  ion. — llie  old-Cashioned  competition  that  weeds 
out  the  weak  and  inedlcieni, — gave  birth,  then,  first,  to 
the  partnershi}),  afterwards  lo  the  corporation,  and  in  our 


The  Mother  of  Trusts  53 

day  to  the  gigantic  corporation.  Tlic  story  of  economic 
progress,  from  the  dawn  of  industry  until  the  present  mo- 
ment, is  tlie  record  of  tlie  concentration  of  effort  and  the 
combination  of  productive  capital.  Co-operation,  concen- 
tration, consolidatiou,  and  combination, — these  are  the 
results  of  competition. 


CHAPTEE  IV. 

THE    WASTES    OF    COMPETITION. 

The  most  noticeable  fact  in  the  industrial  history  of  the 
times  is  the  complete  lack  of  anytliing  like  efficient  organi- 
zation of  industry  at  lar^ue.  Onr  advance  in  general  business 
organization  has  not, until  within recentyears,keptpace with 
ou.r  wonderful  inventions  and  discoveries.  Our  ])roductive 
agencies  have  been  mightily  improved,  but  the  marshaling 
of  our  industrial  forces  has  not  received  the  study  that  it 
deserves.  Trusts  are  in  some  instances,  at  least,  attempts  at 
better  organization.  The  evils  of  the  system,  which  such 
trusts  combat,  are  the  evils  of  unregulated  competition. 
I'rofessor  John  Graham  Brooks  in  his  address  at  the 
Chicago  Trust  Conference  declared  that  one  of  the  most 
successful  business  men  in  the  East  had  said  to  him:  '"If 
people  generally  knew  how  stupidly  and  wastefully  much 
of  the  large  business  is  carried  on  we  should  become  ob- 
jects of  ridicule  ";  and  yet  the  trusts,  which  are  designed 
to  correct  these  faults  and  to  save  these  wastes,  are  the 
objects,  to-day,  of  ])opular  suspicion,  reproach,  and  hatred. 
The  Chainmni  of  the  Interstate  Commerce  Couimission  is 
quoted  as  saying,  in  substance,  that  if  the  worst  enemies  of 
the  railroads  luul  charge  of  the  great  moans  of  transporta- 
tiim,  lliey  would  never  dare  to  do  the  reckless  and  iiidecent 
things  wbich  the  managers  of  the  railroads  themselves 
have  doiu'  in  tlieir  attcnijtis  at  competition.  Professor 
Brooks  is  al-o  tlu'  authoriiy  for  the  statenu-nt  that  in  the 
business  of  insurance,  whicli  has  been  considered  a  marvel 

54 


The  Wastes  of  Competition  55 

of  organization,  tlicre  i?  such  waste  by  reason  of  unregu- 
lated competition  that  one  of  llie  foremost  men  in  the 
insurance  business  said  to  him:  "'It  wouhl  not  be  safe  to 
have  it  known  how  extravagantly  tilings  are  managed,  or 
to  what  srin'V  .-hil'ls  we  are  (h'iven  ";  and  that  when  Pro- 
fessor Iiroolvs  asked  anothei'  ])r()nnnent  insurance  num  if 
this  criticism  were  just,  he  replied:  •'  Oli,  competition  has 
got  us  now  where  the  only  dress  we  ouglit  to  wear  is  the 
cap  and  bells."  Trusts,  when  organized,  as  they  often  are, 
merely  as  unions  of  producers  to  secure  the  advantages  of 
such  a  union  in  producing,  are  attempts  to  regulate  busi- 
ness with  sonu'  degree  of  wisdom  and  judgment;  but  trust 
organizers  are  almost  invariably  denounced  as  foes  to  in- 
dustry and  to  society. 

The  wastefulness  of  unrestrained  competition  is  the 
great  obstacle  in  the  way  of  cheap  production.  It  is  ruin- 
ous to  the  competitors;  it  is  disastrous  even  to  the  com- 
munity. It  not  only  absolutely  prevents  cheap  production; 
it  necessitates  high  prices.  AVhat  are  the  incidents  to-day 
of  competition?  They  are  known  to  every  one;  personal 
observation  and  experience  make  us  all  cognizant  of  them: 
— duplication  and  multiplication  of  effort  to  obtain  a  single 
result,  several  salesmen  striving  to  secure  a  single  order, 
selling  agencies  uselessly  multiplied  and  selling  exjienses 
necessarily  increased,  sales  withont  a  profit  in  order  to 
prevent  ri\a!s  from  selling,  sales  ujion  terms  of  credit 
that  are  in  themselves  a  mere  dissi]iation  of  capital,  cut 
prices  and  bankrupt  sales. — these  are  the  methods  of  mod- 
ern business  life.  Competition  is  said  to  be  the  life  of  trade; 
hwi  com pe!  it  ion.  a.'i  if  i.<  prdrlicc'l .  is.  in  fact,  frequently 
'"war  to  the  knife  a.nd  knife  to  the  hilt.'"  It  is  business 
committing  suicide.  Can  men  ho  blamed, — are  they,  in 
fact,  to  1)0  condemned  or  critici-ed. — for  endeavoring  to 
stop  this  sen-oless,  useless,  and  debasing  warfare,  this  fatu- 


56  The  Trusts 

oils  self-destruction?  Justice  Gray  of  the  New  York  Court 
of  Appeals  voiced  a  growing  sentiment  wlien  lie  said  in 
Leslie  r.s-.  Lorillard  (110  X.  Y.  519):  "  1  do  not  tldnk  that 
competition  is  invariably  a  public  benefit;  for  it  may  be 
carried  on  to  such  a  degree  as  to  become  a  general  evil.'"' 

From  the  standpoint  of  the  producer,  it  is  to  be  borne  in 
mind  that  at  least  three-fourths  of  the  men  engaged  in 
business,  according  to  the  reports  of  the  commercial  agen- 
cies, fail  at  some  period  of  their  business  careers.  Special 
statistics  for  manufacturing,  inilling,  and  mining, — the  in- 
dustries in  whicli  trusts  are  most  frequently  formed, — are 
not  at  hand;  but  these  business  enterprises  are  known  to  be 
risky  and  speculative.  When  successlully  coiuluetcd  tliey 
are  apt  to  be  very  ])r()fitable;  in  fact,  they  r.rc;  alluring 
to  the  capitalist.  But  tlieyare  always  liazartious;  even  those, 
Avliich  for  a  b/iig  time  are  sucecssful,  frequently  ])ecome 
cndjarrassed  and  fail;  and  the  extern  td'  the  loss  seems  usu- 
ally  to  be  a  much  greater  portion  of  the  ca})ilal  invested 
in  them  than  in  the  case  of  failures  of  mercantile  enter- 
prises. 

The  interest  of  the  community,  however,  is  to  be  con- 
sidered from  the  standpoint  of  the  consumers  rather  than 
that  of  the  producers,  for  if  we  consider  any  one  industry, 
the  consumers  vastly  outinnnber  the  ])roduccrs.  Is  the 
old-fashioned  competition  betwet'n  many  struggling  com- 
petitors,— competition  uni'ostrained  and  uncontrolled  even 
by  voluntary  action. — is  this  always  the  best  thing  for  the 
consumers?  Can  the  trusts  by  any  ])ossi])ilily  be  of  benefit 
to  them?  Tlie  answer  is  that  the  waste  of  coinpt-tition  is 
so  great  that  it  does  not  jiermit  the  cheajiest  ])i'oduction; 
that  while  it  wi])es  out  jjrofits,  it  does  not  neces-arily  lower 
prices;  that  our  present  industrial  system,  with  its  lack 
of  organization  and  control,  and  its  waste  of  energy,  is 
cxtravaiMut  and  costlv. 


The  Wastes  of  Competition  57 

Tlicrc  tras  njirr  a  mlscrhj  man  wlio  iJunit/Jil  liis  horse  ale 
ino  mucJi.  Jwn-h  (hnj,  llicrefnir,  he  (jdvc  li'uri  a  smaller  and 
iS7nallcr  qvavlil;/  of  "alx  and  hay,  unlil  finally  he  ycve  him 
none  at  all.  '"-///.sV  al  fJir  momeni  irlien  I  Jiad  yollen  him 
trained  la  live  on  nolhiny,'^  he  afterwards  said,  ''he  died.'' 

The  ui-.'^at  wvviy  oi  consuincrs  is  evor  chmioring  for  lower 
price?.  ''  The  pi'ofit  01  the  })roduccr  and  of  the  distributer 
is  too  ]ii;.;-li."  "'  Tlioy  eat  too  nmch."  ]>y  competition 
the  pri^fit  is  ;:!'adi!a!ly  le>sened.  'I'lie  producer  and  the 
distributer  are  allowed  to  bite  oil!  less  and  less.  The  con- 
sinner  rejiiiees.  I'lien  the  proiit  soon  vani.-hcs  entirely. 
Just  as  the  (i(>tnaiid  for  low  prices  and  tlie  competition 
that  caters  lo  it.  o-cl  tlie  ])roducer  or  the  distributer  to 
the  ])oint  of  pi'oducin,^^  or  distributinf;'  without  a  2)roiit, 
he  <i'0('s  into  l):inkri!;>icy.  dust  at  the  moment  wlien  he 
has  o-dtten  li'aiui^d  to  live  on  nothiufr,  he  dies,  as  a  busi- 
ness man;  he  vanishes  as  a  competitive  force.  Here  is 
tlie  consumer's  \i('i()ry;  hut  where  is  the  consumer's  gain? 
The  compi'tit  imi, — al  least  a  part  of  it, — has  died  with  the 
comjietiior  who  fell  a  victim.  Is  not  the  consumer  hoist 
Avith  his  own  ])etard? 

If  we  turn  from  the  paral)le  to  the  judicial  dictum,  we 
find  the  sanu-  truth  dechired.  In,  Kellogi;-  r^;.  Larkin^  3 
I'inney  loO,  the  court  said: 

'"1  apinclioiKJ  ilial.  it  is  not  iruo  tlmt  eompolition  i^;  the  life  of 
tr,i<I(\  On  till'  comrai'v,  tlial  inaxiiii  is  one  of  I  ho  h-ast  reliable 
of  the  host  we  may  ])ick  ii])  in  (nery  iii.ai-l'.et-placo.  It  is  in  fact 
ihc  sliilil)oIeth  nf  nicrc  ,L;ainl)lin,n'  speculation,  am!  is  liardly  entitled 
lo  take  I'ank  as  an  axiom  in  the  juri>i)nKlonce  of  this  eomury. 
1  !>(!ii\"c  nni\'i'r>al  oh-crxalion  \.  ill  r.tlc.-t  that  in  the  last  (juarter 
oi'  a.  ceiitui'y  comjietition  in  Iradr  has  caused  more  individnal  tlis- 
1  re-s  i;i:in  the  want  of  compft  it  ion.  Indeed,  by  reducing  jtrices 
belovr  or  raising-  liieiii  aliove  value  (as  the  nature  of  the  trade  per- 
iiiittiMii  couipt'tit  ion  lias  done  iiiore  to  mono]iolize  trade,  or  t(j 
siuaii'e  exclnsi\('  a'haiitau-es  in  it.  than  has  been  don.e  by  contract. 
Itivalrv  in  trade   \vill   deslrov   itself,  and   rival   trade-men  seek  to 


58  The  Trusts 

remove  each  other,  rarely  resorting  to  contract  unless  they  find 
it  the  cheapest  mode  of  putting  an  end  to  the  strife." 

As  a  matter  of  fact  the  consumer  is  frequently  injured 
by  excessive  competition.  He  is  benefited,  however,  by 
everything  that  reduces  the  cost  of  the  article  to  the  pro- 
ducer, unless  the  reduction  in  cost  comes  from  the  degrada- 
tion of  labor;  for  this  makes  it  possible,  at  least,  for  the 
consumer  to  get  it  at  a  reduced  price;  and  further,  the 
industrial  history  of  the  world  proves  that  reduced  cost 
always  ends  and  results  in  reduced  prices.  There  is  no  posi- 
tive evidence  that  this  latter  fact  will  be  changed  under 
the  system  of  industry  in  which  trusts  predominate.  But 
of  prices  we  will  treat  later. 

Is  there  any  fixed  point  beyond  which  there  is  no  econ- 
omy in  consolidation?  The  wastes  of  competition  mani- 
fest themselves  in  production  as  well  as  in  distribution. 
Is  there  any  natural  limit  to  the  working  of  the  general 
rule  that  large  organizations  produce  more  cheaply  than 
small  ones?  ]Much  depends  on  what  is  meant  by  produc- 
tion. Prof.  Henry  C.  Adams  of  the  University  of  ]\Iichi- 
gan,  in  an  address  before  the  Chicago  Trust  Conference 
in  September,  1899,  argued  that  there  was  such  a  natural 
limit.    Let  us  quote  him: 

"  It  is  conimon  to  say  that  increase  in  the  size  of  a  manu- 
facturing phmt  permits  tlie  production  of  commodities  at  less 
cost  than  would  otherwise  be  the  case.  There  is  undoubtedly 
some  trTith  in  this  statement.  The  development  of  machinery 
lias  gone  liand  in  hand  with  the  growtli  of  factories,  and  as  a  re- 
sult tlic  jiroduct  is  furnished  at  a  clieapened  rate.  ]3ut  there  is  a 
limit  to  the  ap])lication  of  tliis  rule.  Every  manufacturing  in- 
dustry, con-i.Icred  from  the  point  of  view  of  production,  has  at 
any  particular  lime  a  size  which  may  be  regarded  as  its  normal 
size  of  maximum  cfllcicncy.  This  normal  size  of  maximum  efll- 
ciency  is  determined  by  the  extent  to  which  division  of  labor  and 
the  use  of  macliinery  can  ))e  aj)f)lied.  To  increase  sucli  an  in- 
dustry by  one-Iialf  would  not  result  in  a  decrease  of  tlie  cost  of 


The  Wastes  of  Competition  59 

mamifacluro,  for  it  would  occasion  a  less  cfTcctive  application  of 
tiic  {)iinciplc  of  (li\ision  of  labor.  Wliile,  tliercf(jrc,  it  is  true  that 
the  concentration  of  capital  an(l.lal)or  under  a  single  direction  is 
followed  by  economy  up  to  a  cciiain  point,  it  is  not  true  that  com- 
bination and  concenlnition  beyond  that  point  tend  to  reduce  the 
cost  of  jn'oductidM.  Jlc  who  accepts  this  >tatenient  of  the  case 
must  conclude  that  manufacturing  combinations  (I  say  nothing 
of  other  forms)  contribute  nothing  to  the  reduction  of  the  cost 
of  manufacture  beyond  what  would  be  contributed  shouki  each 
of  the  industries  continue  its  independent  competitive  existence. 
This  is  a  curt  answer  to  a  profound  question,  ])ut  it  is  believed  to 
rest  upon  sound  analysis  and  to  lead  to  the  conclusion  that  the 
motive  for  a  trust  organization  of  manufacturing  industries  is  not 
found  in  a  desire  to  bcnetit  the  public  by  the  reduction  of  cost." 

it  niusl  always  Ijo  Ijoriie  in  mind,  as  pointed  out  in  an 
earlier  chapter,  that  tlie  limits  of  managing  capacity,  and 
of  prnfiiahle  {jroduction,  are  heing  constantly  expanded  by 
such  inventions  and  discoveries  as  the  typewriter,  tele- 
phone, cash-registers,  and  by  improved  means  of  transpor- 
tation and  communication.  Talent  and  skill  in  business 
management  are  being  constantly  fostered  and  developed 
by  and  with  the  constant  increase  in  the  size  of  business 
organizations.  Any  attempt  to  set  arbitrary  limits  to  this 
size, — any  statement  that  up  to  a  certain  point  and  no 
fnrlher,  an  organization  is  a  cheap  prodiu'ing  agency, — is 
to  declare  that  progress  has  come  to  a  standstill,  that  in- 
ventive genius  is  dead,  that  the  ca])acity  of  human  de- 
velo]mi('nt  !<  exhausted.  I'liere  may  l)e  numerous  reasons 
f<u-  limiting  llie  Av.v  of  our  great  business  organizations, 
but  the  basis  nf  those  reasons  does  not  lie  in  the  possibility 
of  their  ])ecoming  so  unwieldy  that  they  will  not  be 
as  chea]i  producers  as  smaller  organizations.  In  so 
far  as  this  ])roduelive  capacity  is  concerned,  the  proper 
policy  is  to  remove  all  special  ]u-ivi leges,  jirevent  all 
unfair  discriminations,  clear  away  all  the  obstacles 
to    the    free    working    of    economic    forces,    and    let    the 


6o  The  Trusts 

laws  of  trade  work  tlicmselvcs  out.  Then  it  will  be 
found  that  the  unwieldy  trust  will  go  to  pieces.  Mere 
size  will,  in  itself,  no  more  permit  the  trust  to  win 
than  it  availed  Goliath  in  his  contest  with  David.  With- 
out arbitrary  laws  capriciously  limiting  the  size  of  busi- 
ness organizations,  these  organizations  will,  if  trade  is  left 
free  and  unliam])ered,  as  surely  find  the  point  of  nuiximum 
efficiency  for  their  capital,  as  water  is  certain  to  find  its 
level.  On  the  otlier  hand,  all  the  legislative  fiats  in  the 
world  that  declare,  "  Thus  large  you  may  become  and 
no  larger,"'  will  be  as  futile  as  were  the  words  of  King 
Canute  to  the  rising  tides,  "  Thus  far  shalt  thou  come 
and  no  further." 

If  by  production,  I'rof.  Adams  means  siuiply  the  making 
of  the  article,  he  may  ])ossibly  be  correct.  But  if  that 
be  his  meaning  it  2natlers  lit  lie  whether  or  not  he  is 
correct.  The  cost  of  goods  to  the  consumer  de].)ends  upon 
the  cost  of  marketing  as  well  as  making. 

We  have  mentioned  in  an  earlier  part  of  this  book  how 
the  demand  for  cheap  ])roduction  lias  always  uecessitaietl 
the  adoption  of  new  machinery  and  the  best  processes,  and 
how  it  has  always  necessitated  concentration  of  capital  and 
combination  of  eli'ort,  and  how,  as  a  rule,  the  large,  well- 
equipped  establishments,  being  the  cheap-producing  estab- 
lishments, have  defeated  the  small  and  weak  establisli- 
nicnts  in  the  struggle  of  com])etition.  This  same  demand 
for  lower  prices  is  not  contented  with,  the  savings  that 
inventive  power  has  nuide  possible.  It  demands  all  the 
savings  that  can  come  from  better  organization.  Xot- 
withstanding  all  the  outcry  against  trusts,  the  people 
clamor  for  cheaper  and  cheaper  goods.  This  demand  can 
be  acce<!ed  to  by  producers  only  by  availing  themselves 
of  all  the  economies  of  shipping  from  convenient  centers 
and  of  large  producti(m  at  tlie  cheapest  jdaces,  and   of 


The  Wastes  of  Competition  6i 

the  economics  oC  iidniinistration  and  clistriLution  that 
come  from  a  peri'ccted  organization,  and  of  the  economies 
that  can  bo  tuggested  by  those  of  special  skill  whose  tal- 
ents can  be  obtained  only  by  the  expenditure  of  great 
sums  of  money.  Just  as  the  demand  for  low  prices  com- 
pels tiie  adojjtion  of  machinery,  it  compels  the  forma- 
tion of  larger  industrial  organizations.  There  is  prob- 
ably not  a  single  one  of  the  great  trusts  that  can- 
not effect  enormous  savings  in  rhe  making  and  market- 
ing of  their  product;  th.at  cannot  furnish  it  to  the 
consumer  at  a  less  cost  (cost  of  raw  material  being  as- 
sumed to  be  the  same)  than  prevailed  when  the  same  article 
was  made  and  marketed  by  each  of  the  concerns  embraced 
in  the  trust.  We  admit  that  the  chief  saving  of  trusts  is 
in  improved  methods  of  distributing  its  products;  but  this 
saving  is  enormous.  The  intensity  of  competition  has  un- 
doubtedly made  the  expense  of  marketing  one's  product, 
not  infrequently  greater  than  the  cost  of  making  the  prod- 
uct. 

What  are  the  economies  which  trusts  make  possible? 
What  are  the  industrial  advantages  of  this  form  of  organi- 
zation? Briefly  speaking,  they  are  the  savings  of  the 
wastes  of  competition.  They  are  the  Ijcnefits  of  organiza- 
tion as  contrasted  with  the  evils  uf  an  entire  lack  of 
organization. 

First.  Trusts  are  able  to  buy  in  large  quantities  and 
therefore  chea])ly.  Perhaps  it  will  1)0  said:  '•  This  is  no 
advantage  to  the  public,  for  if  they  buy  chea])ly,  the  seller 
must  part  with  his  goods  at  a  low  ])rice.  This  is  a  bene- 
fit to  the  trust  ])urchas(.'r.  but  it  (H-riainly  is  no  benefit  to 
the  seller  and  it  may  be  of  no  advantage  to  the  com- 
munity." But  it  is  an  advantage  to  the  community  in 
just  so  far  as  the  (•hca])ening  springs  from  the  ability  to 
perform  a  very  great  task  or  to  do  a  very  large  work  with 


62  The  Trusts 

an  expenditure  of  energy  proportionately  less  than  that 
required  for  a  little  task  or  a  small  undertaking.  The 
unceasing  attempt  to  procure  cheaper  goods  is  a  struggle 
for  progress  whenever  it  aims  to  accomplish  its  purposes 
by  causing  production  or  distribution  with  less  labor.  If 
large  quantities  of  goods  can  be  bought  and  sold  and 
shipped  and  delivered  at  a  lower  proportionate  expense 
than  small  quantities,  then  the  lowering  of  the  price  is  a 
benefit,  because  it  represents  a  cheapening  of  the  cost.  It 
is  a  positive,  actual,  permanent  Ijenefit  to  the  community, 
which  a  mere  cut  of  prices  that  did  not  result  from  a 
cheapening  of  the  cost  of  production  might  not  be.  It 
would  hardly  seem  necessary  to  argue  the  proposition  that 
the  ability  to  buy  in  large  quantities  and  therefore  cheaply 
(if  followed  by  a  lower  selling  price)  is  a  benefit  to  the 
community.  But  trusts  are  to-day  fiercely  assailed  because 
of  the  very  fact  that,  it  is  claimed,  they  tend  to  lessen 
the  price  of  raw  materials.  This  statement  will  be  dis- 
cussed more  fully  in  a  subsequent  chapter  and  the  facts 
will  be  considered.  But  let  us  for  a  moment  consider  the 
logical  outcome  of  the  argument  of  those  who  contend 
that  the  lessening  of  cost  due  to  the  purchase  in  large 
quantities,  because  it  is  a])parently  so  great  an  injury  to 
those  who  sell  raw  materials,  is  an  element  of  injury  to 
the  people,  and  one  of  the  evils  of  trusts.  If  it  is  a  bad 
thing  that  prices  be  lowered  l)ecause  of  purchases  in  large 
quantities. — if  directly  or  indirectly  trusts  for  this  rea- 
son should  bf  ]jr(jhi])ited  or  made  impossible, — then  why 
not  enact  and  declare  that  henceforth  and  forever,  ])ur- 
chases  should  be  in  smaller  quantities  than  are  allowed 
to-day?  Why  not  forbid  all  wholesaling?  AVhy  not  make 
the  retailers  sell  only  l)y  the  smallest  unit  of  measure? 
The  ab.-ui'dity  of  .<ueh  a  course  shows  the  equal  folly  of 


The  Wastes  of  CompctiLion  63 

atteniptintr  to  limit  hu'<^Q  ])iirelia>e.<  by  irusts  l)ccaiise  they 
result  ill  a  cliL'a])er  {)rice  to  them. 

Second.  A  seeoiul  economic  atlvantage  of  trusts  is  their 
ability  to  sell  in  large  quantities,  with  a  smaller  selling 
force  and  at  a  smaller  percentage  of  expense.  Conse- 
quently, they  can,  if  they  will,  sell  more  cheaply.  The 
question  whether  they  do,  in  fact,  sell  at  a  lower  price, — 
the  vital  question  of  trusts, — will  be  considered  in  fol- 
lowing chapters.  But  there  are  many  who  seeing  all  the 
hardship  that  is  caused  by  the  displacement  of  labor,  by 
the  discharge  of  large  numbers  of  commercial  travelers 
whose  services  are  no  longer  needed,  by  the  elimination  of 
a  great  number  of  jobbers  and  middlemen,  and  seeing  all 
the  suffering  and  inconvenience  and  financial  loss  sus- 
tained by  them,  consider  this  ability  of  trusts  to  sell  with 
a  smaller  selling  force  as  a  great  objection  to  trusts  and 
one  of  its  worst  evils.  The  matter  can  be  referred  to  here 
only  briefly;  fuller  consideration  will  come  later.  But 
if  it  is  folly  to  dis])ense  with  the  now  useless  selling  force, 
and  with  the  jobbers  and  middlemen  who  are  no  longer 
needed;  if  it  is  to  the  advantage  of  the  community  that 
these  people  be  kept  at  work  although  the  same  work 
could  be  done  without  ihcm,  why  would  it  not  be  wise 
to  insist  that  evei'v  wholesaler  and  every  mauufacturcr  and 
every  jobber  should  double  his  force  of  commercial  trav- 
elers and  >h(nild  estal)lish  twice  as  many  selling  agencies, 
and  why  shoiild  not  a  larger  number  of  men  be  drafted, 
if  necessary,  and  compelled  to  go  to  work  as  retailers?  The 
answer  is  that  us(.■le^s  labor  and  toil  are  ex'iienses  and  bur- 
dens not  ahuie  to  tliose  who  primarily  pay  for  them,  Imt 
eventually  to  all  tin*  community.  We  will  never  know- 
inglv  expend  twice  the  energy  that  is  necessarv  to  do  a 
given  amount  of  work.     We  will  not  jtay  for  that  which 


64  Tiie  Trusts 

^ve  can  ,irGt  foi-  nothini;^;  wc  will  not  part  with  our  jorop- 
eny  for  that  which  wc  know  is  of  no  value  to  us. 

Third.  Another  important  economic  advantage  of  trusts 
is  that  the  several  plants  of  the  organization  heing  situated 
in  ditfcrcnt  ^■.ctions  of  the  country,  the  demand  of  r.r.y 
one  locality  can  be  supjdied  from  a  plant  in  tliat  vicinity, 
thtis  saving  enormous  expense  in  transportation. 

Fourth.  The  necessity  of  a  very  large  p'ortion  of  the  ad- 
vertising, whicli  is  now  so  lieav}'  an  expense  of  business, 
can  be  saved  by  trusts. 

Reverting  to  the  last  three  points,  let  us  consider  a 
few  facts  of  daily  observation  witii  reference  to  the  amount 
of  the  expense  incurretl  in  the  em])loyment  of  commercial 
travelers,  and  in  advertising,  and  in  transportation.  Tens 
of  thousands  of  commercial  travelers  are  emfiloyed,  who  are 
paid  large  salaries,  besides  their  expenses  in  traveling  and 
social  treating.  Their  work  is  not  so  nnich  to  introduce 
new  goods  or  to  educate  ]K'ople  in.  taste  or  style,  as  to 
solicit  trade, — to  entice  it  away  from  competitors  and  to 
their  employers.  Millions  of  dolLirs  are  s])ent  annttully  in 
this  country  in  advertising.  Some  of  it  is  useful  inforjna- 
tion,  but  the  mo.--t  of  it  is  merely  to  call  the  con.-umers' 
atieniion  to  the  business  of  one  of  several  com])etil()rs, — to 
influence  him  to  trade  there  instead  of  eisewlu're.  lUit 
v,ii;'t  of  the  expeiise  of  trans[)ortationy  'hhe  market  to-day 
is  universal;  Jiien  sell  their  ])roducts  in  all  sections  of  the 
country,  in  all  ([uarters  of  the  globe,  ^';l.■^tly  im])rove(l 
means  nl'  ti'ansuorta.tiou  lijive  wijicd  out  old  maj'ket  limits, 
hrciglit  i-ates  lia.ve  been  niarvelously  idu'apeneil;  still 
freiglit  is  one  (d'  the  heavy  expenses  coniu'cted  with  nter- 
cantile  bu.-ines>.  It  is  needlessly  and  wastefully  so,  be- 
cause di>;  ribut  iou  is  not  made  from  ap])ropi"ia(('  or  (-"H- 
vcnient  centers.  'J'he  enm'mous  gross  freight  earnin;'s  of 
ou!'  r-;iirnads,  to  Viliich  must   be  added  the  vast  sums  re- 


The  Wastes  of  Competition  65 

ceivod  by  owners  of  sleainboats,  canal  boats^  and  stages, 
show  thill  ihc  cost  oi'  what  we  eat  and  wear  and  consume 
is  greatly  increased  by  the  expense  ot  transportation. 
;Muc1i  ot  tins  is  needless.  Trusts  save  a  great  deal  of  this 
"waste.  With  mills  in  all  sections  of  the  country,  the  local 
demand  can  usual  1\'  be  supplied  from  local  centers  of  dis- 
triljution.  The  factory  of  New  J'higland  need  not  send  its 
jjroducts  to  the  far  West  or  to  tlie  South,  to  compete  with 
the  sanu^  products  nuule  there.  '"  Coals  need  not  be  carried 
from  2se\vcasi!e  to  Carlisle." 

Fifth.  Tliere  can  be  the  greatest  specialization  in  manu- 
facturing. A  })lant  which  is  peculiarly  well  adapted  for  the 
prodiiction  of  a  particular  brand  or  style  or  quality,  can 
be  used  for  that  purpos(\  The  very  Ijest  special  machinery 
can  be  profitably  enijdoyed  in  it,  and  all  the  hands  em- 
ployed can  s])ecialj/.e  in  this  branch  of  the  business.  The 
fiest  equipped  plants  nuiy  be  run  to  their  full  capacity. 
Others  which  are  needed,  may,  by  means  of  the  enormous 
capital  ])ossesse(l  l)y  the  trust,  l)e  put  in  good  working 
order.  Those  which  are  not  needed  may  be  closed.  ^lany 
are  continuously  lamenting  this  closing  up  of  industries, 
this  throwing  men  out.  of  employment,  this  Idighting  of  the 
business  ]>ros])ects  of  nourishing  towns  ami  villages;  but 
it  the  trust  does  not  arbitrarily  restrict  the  output,  and  if 
It  is  aide  with  fewer  plants  and  less  men  to  produce  all 
that  is  needi'd.  why  should  it  continue  thi>  extravagant  and 
costly  [)roducti(m  that  is  incidental  to  running  many 
snudl  [ilant>?  If  the  closing  of  these  unnetMlcd  factories  is 
so  great  an  injury,  why  not  reap  the  full  measure  of  Ijenofit 
of  the  op])Osite  policy,  niid  insi-t  that  the  number  of  fac- 
tories in  existence  be,  at  lea.-t,  (l(.)ubled? 

'i'liis  sliuiiing-down  of  factories  ami  mills  ])y  trusts  is 
(.■ondemncd  as  oiu'  of  ;l;c  greatest  evils  of  th(^  new  system, 
but  it  .should  not  be  forgotten  that  under  the  competitive 

i 


66  The  Trusts 

system,  mills  and  factories  and  stores  are  constantly  being 
closed,  because  unable  to  compete  successfully. 

The  real  evil  of  this  practice  of  trusts  in  closing  factories 
is  not  the  closing  of  the  factory  so  much  as  it  is  the  prac- 
tice of  sometimes  paying  these  people  for  periods  of  inac- 
tivity; and  the  more  common  practice  of  buying  the  plant 
in  order  to  overcome  its  competition  when  it  is  known  that 
it  cannot  be  a  cheap  and  profitable  producer. 

Sixth.  A  great  advantage  that  the  trust  has  in  doing 
business,  springs  from  the  very  fact  that  its  plants  are  not 
all  located  in  one  place.  Xo  catastrophe  can  be  conceived 
which  will  interrupt  the  en  Lire  business  or  completely 
suspend  its  operations.  If  a  Hood  or  a  fire  compels  one 
plant  to  shut  down,  the  business  may  be  continued  in 
other  plants. 

Seventh.  While  individual  concerns  which  engage  in  the 
bitter  struggle  of  competition  not  infrequently  become  so 
exhausted  and  their  resources  so  depleted  that  they  are 
unable  to  test  or  adopt  new  inventions  or  processes, 
the  abundant  capital  which  trusts  are  able  to  enlist  en- 
ables them  to  carry  on  eoustaut  experimentation  and  to 
adopt  the  latest  and  most  improved  methods  and  means. 
It  may  be  urged  that  if  they  have  sole  possession  of  a  field 
of  iiulustry, — if  they  have  a  monopoly, — they  will  have 
no  incentive  to  experiment  with  new  metliods  or  adopt 
new  machines.  But  they  have  no  legal  monopoly,  no  ex- 
clusive legal  right,  and  while  their  strength  ami  their 
established  trade  give  to  them  an  enormous  advan- 
tage over  their  com])etitors,  they  have  no  exclus- 
ive power  to  sell,  exce])t  so  long  as  they  can  sell  most 
cheaply,  aud  tliis  they  cau  do  only  when  they  can 
])roduce  and  distribute  most  cheaply.  Despite  all  the 
incentive^  that  the  intensity  of  competition  gives  to  sepa- 
rate individual  producers  to  adopt  the  most  improvi'd  ma- 


The  Wastes  of  Competition  67 

chincr}-  and  the  best  processes,  so  as  to  survive  in  the 
tremendous  siruti^^uh'  of  eom])etition,  it  is  a  fact  that  tlic 
inadequacy  of  tlieir  capital,  tlie  very  bankruptcy  occasioned 
by  tlieir  competitive  struggle,  lias  frequently  prevented 
their  doing  that  which  alone  could  keep  them  alive.  Wlien 
the  International  Paper  Co.  was  foi'med,  it  was  most  bit- 
terly assailed  by  the  newspapers  of  the  country.  In  an 
address  presented  by  the  American  Xewspaper  Publishers' 
Association  to  the  Anglo-American  Joint  High  Commis- 
sioners, and  signed  by  the  owners  of  157  newspapers,  an 
arraignment  of  this  trust  was  made.  Whatever  may  be  said 
as  to  the  sufficiency  of  tliis  charge  against  trusts,  it  is,  at 
least,  evidence  from^  persons  in  no  way  favorable  to  trusts, 
and  demonstrates  our  proposition  that  competitive  pro- 
ducers are  often  unable  when  acting  alone  to  adopt  im- 
proved methods  and  nuichinery,  which  tliey  could  if  con- 
solidated. 

In  reading  the  paragraphs  of  this  address,  which  are 
quoted  below,  it  should  be  borne  in  mind  that  the  paper 
trust  embraced  companies  which  were  fairly  representative 
of  the  trade.  "While  it  was  a  combination  of  the  weak  and 
struggling,  il  must  have  been  a  union  of  companies  of 
financial  standing  nearly  equal  to  the  average  of  all  tlioso 
engaged  in  the  business,  for  it  took  in  at  first  twenty-five 
and  afterwards  thirty  of  th(^  juil])  and  pai)er  mills  of  the 
country,  having  an  aggregnle  ]iroductii»n  of  about  eighty 
per  cent  of  the  total  I'iroduct  of  news  paper.  The  para- 
graphs in  the  protest  of  tlie  American  Xewspaper  Pub- 
lishers' Association,  which  are  pregnant  with  significance, 
are  the  following.  tlu>  italics  being  our  own: 

"Excessive  and  iiiuirnpor  prices  were  paid  for  many  mills  that 
wore  IfX'atpd  on  exhaust ed  watercourses  and  that  were  tributary 
to  denuded  timber  tracts;  for  milN  that  at  periods  of  the  year 
have  an  insufllcient  supply  of  water  or  arc  under  water:    for  mill^ 


68  The  Trusts 

that  are  inferior  and  worthless  in  machinery,  equipment,  and  con- 
struction; for  mills  that  must  pay  excessive  rental  for  water 
power;  for  mills  that  do  not  own  or  control  woodlands;  for  mills 
that  have  neither  pulp-grinding  attachments  nor  sulpliite  aux- 
iliaries. 

"  Five  of  the  paper  mills  obtain  their  power  at  a  total  annual 
cost  of  $196,000.  Two  others  are  run  by  steam,  which  makes 
competition  impossible,  and  five  others  have  insufficient  power. 
Four  owned  no  woodlands  and  ten  of  the  mills  had  no  sulphite 
auxiliaries.  Xinety-eiyht  paper-making  machines  were  comprised 
in  the  plant  of  these  niiUs,  l)ut  only  forty-eight  of  the  tnachines 
were  of  recent  date  or  desiraile  pattern.  Xut  one  of  the  mills  in 
all  the  combination  possessed  all  of  the  six  essentials  of  the 
cheapest  and  most  successful  manufacture." 

It  i>  not  only  true  that  in  the  struggle  of  competition, 
the  independent  producers  have  been  unable  to  afford  the 
latest  and  most  improved  appliances  and  methods,  but, 
when  combined,  they  not  only  could  afford  them,  but  did, 
in  fact,  test  and  adopt  them.  One  frequently  reads  or 
hears  denials  of  this  statement.  It  is  therefore  proper  to 
quote  so  eminent  and  disinterested  an  authority  as  Ernst 
Von  Halle,  who  in  his  book,  Trustfi  or  Industrial  Comhina- 
tion.^  in  flip  Unifed  States,  has  said: 

"  "We  find  continual  pfTorts  at  further  advance,  by  the  applica- 
tion of  the  newest  machinery  and  of  new  labour-saving  processes, 
and  this  as  rapidly  as  is  consistent  with  the  amortization  of  the 
means  of  production  on  hand.  For  example,  the  American  Sugar 
Tiffining  Company  has  built  a  new  refineiy.  furnished  with  the 
iiewest  technical  improvements,  to  serve  only  as  a  safeguard  in 
the  case  of  a  suddenly  increased  demand,  or  of  stoppages  in  other 
fnctorios.  The  Cotton  Oil  Company  has  a  great  experimental  sta- 
tion of  its  own.  The  Whiskey  Trust  has  introduced  quite  a  num- 
ber of  inventions  to  improve  the  quality  of  its  product. 

"  By  all  new  inventions  the  whole  business  is  benefited  at  the 
same  time,  while  the  rrreat  number  of  plants  gives  a  chance  to 
7nak(>   local   cxpei-in^eTits   with    now   processes   of  manufacture. 

"In  this  direction,  none  of  the  adversaries  have  been  able  suc- 
cessfully  t-o    accuse    the    trusts    of   negligence;     on   the    contrary, 


The  Wastes  of  Competition  69 

since  the  bop;inniiipf.  <'Oriipl<iinls  have  bcon  based  upon  the  very 
allegation  that  througli  the  introduction  of  laljour-saving  pro- 
cesses and  of  niaciiinery  of  the  newest  construction,  and  through 
the  closing  of  supcrlluous  factories,  numerous  workinginen  have 
lost  their  occupation, — an  objection  which  surely  is  not  a  new 
one,  nor  peculiar  to  tliis  form  of  industrial  progress.  Only  in  com- 
binations secure  against  all  kinds  of  competition — i.e.,  legal 
monopolies — can  there  ever  arise  the  danger  of  a  standstill  in 
methods  of  production."' 

A  point  that  by  no  moans  should  be  overlooked  is  the 
ability  of  a  great  trust  to  give  up  one  of  its  local  plants 
for  purposes  of  experimentation,  whereas  if  that  plant  were 
the  sole  plant  of  any  company,  business  could  not  be  sus- 
pended for  that  purpose.  Another  point  of  vital  im- 
portance is  that  as  soon  as  the  ])racticahility  of  any  process 
or  machine  has  been  demonstrated,  as  soon  as  it  has  been 
found  to  be  labor-.siving  aiul  clieap-i.iroducing,  it  will  not 
be  adojitcd  hy  one  of  many  ])r()ducers,  but  will  be  })laced 
by  the  trust  in  all  the  plants  which  make  up  tlu>  aggrega- 
tion, 'riius  the  bencdl  of  any  invention  or  process  will  be 
more  sprcilily  and  more  generally  realized. 

Eighth.  The  enormous  capital  of  trusts  enables  them  to 
spend  large  sums  of  money  in  the  development  and  ex- 
tension of  trade  in  foreign  countries.  Jt  is  necessary  here 
only  to  make  mention  of  this  great  economic  advantage, 
inasmuch  as  it  lias  been  discussed  more  fully  in  the  ])re- 
vi(nis  chapter  on  the  "^lother  of  Trusts,"  ami  will  also  be 
considered  in  the  cha})ter  on  '"Trusts  and  t]xpansion."" 

Xinth.  One  of  the  great  econrunic  advantages  of  trusts 
is  their  conservative  iniluence  in  the  matter  of  credits. 
'Ih'usts  tt'ud  to  li-sin  rost  by  dimini>hing  bad  debts,  ^[r. 
Bryan  has  criticised  this  coir-iTvatism  in  granting  credits. 
tie  has,  in  fact,  ilecliired  it  to  lu'  one  of  th(>  evils  of  trusts, 
and  has  reiireseiited  tlie  I'etailer  as  being  the  victim  of  a 
somewhat  nnu'cilcss  wholesaler,     lie  lias  said:    "  The  trust 


70  The  Trusts 

can  not  only  fix  the  price  of  what  it  sells,  but  it  can  fix  the 
terms  ujtoii  which  it  sells.  You  can  pay  cash,  or  if  tliere 
is  a  discount,  it  is  just  so  much  discount,  and  you  have  to 
trust  to  the  manager's  ijcnerosily  as  to  what  is  fair,  when 
he  is  on  tlie  one  side  and  you  on  the  other."  Without  for 
the  present  considering  the  point  as  to  whether  the  trust 
can  actually  and  arbitrarily  fix  prices  or  even  terms  of  sale, 
we  believe  that  it  will  be  generally  conceded  that  one  of 
the  evils  of  the  present  competitive  system  is  that  which 
yiv.  Bryan  has  chosen  to  refer  to  as  '*  generosity  "  in  the 
extension  of  credit.  The  cause  of  nine-tenths  of  the 
bankruptcies  and  failures  is  tlie  abuse  of  credit.  It  is  not 
onl}'  an  evi-l  to  the  nuin  who  is  forced  to  give  the  credit 
in  order  to  obtain  the  trade,  but  in  the  intensity  of  com- 
petition among  sellers  there  is  such  an  undue  extension  of 
credit,  that  not  infrequently  goods  are  practically  forced 
on  the  retailer.  He  is  virtually  compelled  against  his  own 
better  jutlgnient  to  over-stock.  The  inevitable  result  is  a 
large  pereentago  of  bad  debts,— a  percentage  which  is  kept 
down  only  by  the  maintenance  by  the  large  business 
liouses  of  expensive  collection  departments.  The  consumer 
is  tlie  Atlas  who  bears  upon  his  shoulders  the  whole  com- 
mercial world.  The  sum  total  of  bad  debts  and  uncollecti- 
ble accounts,  as  well  as  the  expenses  which  the  extension 
of  credit  necessitates, — the  interest,  the  cost  of  book- 
keeping and  of  maintaining  collection  departments, — all 
fall  u})on  him.  When  com[)etition  is  restricted,  the  eager- 
:ne>s  to  .-cll  is  limited  to  sales  to  those  whose  solvency  is 
uiupiestioned. 

'J'enth.  The  greatest  advantage  of  trusts  is  the  regula- 
tion of  pi'oduction.  Handling  a  very  large  portion  of  the 
])ro(l;ict  of  ail  industry,  its  managers  can  obtain  approxi- 
mately aecural(,'  infonnatioii  as  to  tlie  market  and  its  needs, 
and  as  to  the  demand  for  the  article  which  thevmake.    With 


The  Wastes  of  Competition  71 

a  full  kno\vlefl,2;c  of  the  capacity  of  their  own  factories  and 
of  those  of  their  competitors,  if  atiy,  they  can  adjust  their 
output  to  correspond  witli  the  demand.  They  can  avoid 
the  necessity  of  carryin-;-  lar^-e  stocl<s;  tht'rehy  they  can 
save  niucli  of  tlie  exj)ensc  of  insurance,  storage,  interest, 
and  sliop-wear.  A\'hcn  we  try  to  conceive  the  vast  total 
amount  (d'  these  e.\])enses,  we  are  ahnost  bewildered  hy 
the  greatness  of  the  figures;  hut,  great  as  tliey  are,  a  large 
})orti()n  of  the  expense  would  he  saved  to  the  world  by  the 
metliods  of  trusts.  But  the  greatest  benefit  is  not  the  sav- 
ing of  the  insurance,  fhe  storage,  the  interest,  or  the  shop- 
wear,  hut  that  which  comes  from  the  lessening  of  the  evil 
of  over-production, — an  evil,  the  crushing  pressure  of  which 
is  daily  being  felt  more  and  more  by  all  the  industrial  na- 
tions of  the  world,  'i'here  is  jiot  an  industry  in  wliich 
machinery  has  been  ]ierfected  which  is  not  heing  endan- 
gered by  over-production.  The  machines  which  the  skill 
and  the  cunning  o\'  men  have  invented,  are  hecoming 
Frankeusteins  that  now  threaten  to  crush  us.  The  eighty 
millions  of  Americans  now  have  a  productive  capacity  that 
is  equal  to  the  consum])tive  power  of  one  hundred  and 
sixty  millions  of  Americans:  and  it  should  be  borne  in 
mind  that  the  Americans  are  tlic  greatest  consumers  of 
the  world.  It  has  been  estimated  that  the  machines  in 
this  count I'y  will  enabk'  its  inhabitants  to  ])roduce  as  much 
as  foui-  hundred  millions  of  ])eople  cmdd  ])roduce  without 
lal)()r-saving  machines.  Theri>  is  not  a  single  industry  in 
which  th(^  evil  of  over-jiroduction  does  not  exist  to-day. 
Those  in  which  it  was  first  most  acutely  felt  were  the  first 
to  form  trusts.  I'rior  to  the  formation  of  the  Standard 
Oil  Company,  the  market  was  so  glutted  that  not  infre- 
quently tlie  oil  was  allowed  to  run  to  was!(>  in  creeks  and 
brooks.  The  wliisky  industry  has  long  ])een  able  to  supply 
more  than  the  dema.ud.     Soon  after  the  close  of  the  civil 


72  The  Trusts 

Avar,  tlio  produclivc  capacity  of  American  distilleriGS  was 
three  times  that  of  the  consumptive  power  of  the  country, 
and  prices  were  so  depi'essed  that  occasioiialJy  alcohol  was 
oilered  on  the  market  at  less  then  the  amount  of  tlie  tax. 
In  18?0,  to  correct  the  evils  of  over-production,  ]iearly  all 
of  the  distilleries  north  of  the  Ohio  Iiiver  entered  into 
an  agreement  to  produce  only  to  the  extent  of  two-ntths 
of  their  capacity.  In  1S8(S,  the  export  trade  having  greatly 
fallen  off  (because  the  foreign  })roduction  had  increased), 
the  capacity  of  the  distilleries  was  tour  times  as  great  as 
the  domestic  consumption.  In  1881,  the  luiiform  price 
was  helow  the  cost  of  production  as  it  had  been  several 
times  previous  thereto,  and  a  pool  was  foi'med  for  the 
express  purpose  of  ex])Oi'ting  whisky  even  at  a  lo.-s  so  as 
to  turn  the  product  into  ready  money.  The  loss  was  ap- 
portioned among  the  dilferent  distilh'ries,  wliich  were  rcg- 
ularl}^  assessed  for  the  ]mr])Ose.  When  the  first  A^hisky 
trust  was  formed,  it  closed  sixty-eight  out  of  eighty  distil- 
leries, Ijut  with  the  remaining  twelve  it  was  able  to  furnish 
the  same  output  as  1)efore  and  soon  to  increase  it  largely. 
It  should  also  be  borne  in  mind  that  the  capacity  of  the 
plants  owned  by  the  sugar  trust  is  four  times  the  domestic 
demand;  and  that  the  cotton-oil  t)'ust  was  able,  as  soon 
as  formed,  to  close  many  of  its  j)re-ses.  It  is  always  more 
satisfactory  to  cite  an  exam])le  whicli  has  come  under  per- 
sonal observation.  In  the  city  of  Aubuivn,  X.  Y.,  within 
the  past  week  (:\Iay  21,  190(1),  there  has  lately  occurred  a 
shut-down  in  a  shoe-factory  which  is  the  ])rincipal  one 
in  the  tov,n  and  one  of  the  leading  ones  in  th(>  country. 
The  statemcMit  of  the  company  sliows  that  this  is  bu.i  one 
of  the  thousands  of  similar  cases  which  can  b(,'  attriljuted 
to  over-production.  Here  are  some  significant  paragraphs 
from  it: 


The  Wastes  of  Competition  73 

"  statistics  show  that  the  shoe  factories  of  this  country,  when 
running  full,  can  produce  as  many  shoes  in  seven  months  as  we 
consume  in  a  year.  The  general  business  of  the  country  has  been 
exceptionally  good  the  past  year  or  more,  with  tlie  result  that  the 
factories  have  run  full,  and  there  has  been  a  large  over-produc- 
tion of  boots  and  shoes,  leaving  large  stocks  in  tiie  hands  of  both 
jobbers  and  retailers.  These  conditions  make  it  very  difficult  to 
obtain  orders  ahead,  as  the  dealers,  knowing  the  conditions  and 
understanding  fully  that  prices  of  leather  are  governed  by  sup- 
ply and  demand,  feel  that  prices  may  be  less,  later  on,  and  so  are 
holding  otr  and  trying  to  dispose  of  stocks  on  hand,  which  seems 
wise  for  them  to  do.  Dealers,  willing  to  buy  at  all,  are  demand- 
ing and  receiving  concessions  from  manufacturers.  Prices  of 
leatlier  so  far  remain  fairly  firm,  so  there  is  cjuite  a  risk  for  the 
manufacturer  to  buy  leather  at  present  prices  and  cut  into  goods 
for  fall  delivery  when  prices  by  that  time  may  be  much  less. 

"  We  finished  cutting  spring  orders  some  time  ago,  ;!nd  iiave 
since  been  running  on  fall  orders,  the  bills  for  which  are  dated 
fall,  to  be  paid  at  dates  agreed  u[>on  after  that  time.  Reports 
sliow  tliat  most  shoe  factories  during  the  past  six  weeks  have 
been  running  eitlier  one-quarter  to  one-lialf  their  capacity,  or  are 
comj)letely  shut  down.  \\"e  have  always  taken  great  pride  in  giv- 
ing our  lielp  steady  \\ork,  and  often  make  sacrifices  to  do  so, 
which  they  know  notliing  of.  Wiiile  we  were  considering  the 
advisability,  yesterday,  of  ordering  more  slock  to  keep  running, 
the  report  came  to  the  office  that  some  of  tlie  employes  ^\■ere  dis- 
satisfied, and  we  concluded  if  they  did  not  appreciate  the  condi- 
tions of  trade  and  v.hat  we  were  ti-yiiig  to  do  for  (hern,  we  would 
close  down  for  a  time,  as  other  slioe  manufacturers  are  doing, 
particularly  as  what  fall  orders  we  have  booked  are  from  one- 
quarter  to  half  the  size  only  that  the  same  parties  have  usually 
given." 

The  evils  of  nvcT-prnductirm  aro  nor  measured  by  tlie 
fall  in  price  which  the  rnanufacturei'  has  to  endure.  l)ur 
more  hy  the  ennrnious  loss  that  fall^  n]ion  the  laborer  who 
is  thrown  out  of  eniploytnent,  and  cvcti  rn(U'e  by  the  resulr- 
in,i{  sta,Lnialion  ihat  pervades  ;dl  h";ui;-iie.^  of  industry  and 
which  causes  flnanci  d  jianics  and  'ms-n:',-s  depression, — 
those  periods,  so  trying  lo  the  ,-ouls  ol  mw.,  whicdi  during 


74  The  Trusts 

the  last  half  century  have  been  occurring  with  increasing 
frequency  in  America.  Unless  these  evils  can  be  combated 
and  overthrown,  unless  our  production  can  be  regulated 
and  restricted  to  our  effective,  healthful  demand,  or  unless 
outlets  can  be  found  for  our  surplus  products,  instead  of 
being  a  prosperous  country  and  a  happy  and  contentei 
people,  we  will  become  a  most  wretched  and  miserable  na- 
tion, and  discontent,  envy,  and  sedition  will  be  rife. 

It  would  be  grossly  unfair,  however,  to  refer  to  the  power 
of  trusts  to  regulate  production  or  to  correct  the  evils  of 
over-production  by  the  development  of  foreign  markets, 
without  conceding  that  the  power  to  prevent  over-produc- 
tion implies,  to  a  great  degree,  at  least,  the  power  arbi- 
trarily to  restrict  production,  at  least  temporarily,  and 
thereby  to  raise  prices  unduly.  This  is  but  one  phase  of 
the  great  monopolistic  element,  which  is  more  or  less  inci- 
dental, if  not  more  or  less  inherent  in  trusts.  But  this 
point  will  be  considered  later.  We  have  this  year,  in  the 
spring  oi  ]!)00,  had  either  a  most  striking  example  of  the 
abuse  of  this  power  of  trusts  over  production,  or  else  con- 
clusive proof  that  even  trusts  that  have  succeeded  in  getting 
control  of  an  entire  industry,  may  be  hardly  more  able 
to  foresee  the  demands  of  the  future  than  small  separate 
concerns.  The  American  Steel  and  Wire  Co.,  within  two 
months  after  a  statement  by  the  head  of  the  company  to 
the  effect  that  the  active  demand,  which,  for  many  months, 
had  characterized  the  market,  was  certain  to  continue,  sud- 
denly closed  about  a  dozen  of  its  plants  and  threw  out  of 
employment  four  thousand  of  its  employees.  This  may 
have  been  done  arbitrarily  for  the  purpose  of  depressing 
the  value  of  the  stock  of  the  company.  If  it  was  an  actual 
necessity,  it  is  hardly  possible  to  believe  that  the  managers 
of  the  company  possess  perfect  business  foresight.  The 
closing  of  these  works  would  hardly  seem,  however,  to  have 


The  Wastes  of  Competition  75 

been  for  the  purpose  of  so  limiting  production  as  to  create 
an  artificial  demand  in  excess  of  supply,  for  the  purpose  of 
raising  prices,  because  with  the  closing  down  of  the  works 
mentioned,  the  company  did  very  greatly  reduce  its  prices 
for  the  purpose  of  marketing  its  surplus  stock. 

Eleventh.  Trusts  work  great  economies  by  their  ability 
to  utilize  waste,  and  to  turn  it  into  valuable  by-products. 
The  Standard  Oil  Co.  in  tliis  way  has  built  up  enormous 
industries  subsidiary  to  its  main  business  of  refining 
petroleum.  Ernst  Von  Halle  states  that  there  are  more 
than  three  hundred  by-products  in  the  domain  of  this  com- 
pany, which  have  yielded  most  valuable  materials  to  numer- 
ous otiier  industries.  Thirty  of  these  are  commercial 
products  in  which  there  are  large  dealings. 

'^rwelt'th.  "We  have  alluded  to  the  conservative  power  in 
business  which  trusts  exercise  by  restricting  credits. 
They  present  another  financial  advantage.  They 
broaden  the  field  of  investment.  It  would  be  useless  to 
deny  that  under  the  loose  corporation  laws  that  exist  in 
most  of  our  states,  under  the  lax  methods  of  inspection  and 
control,  and  because  of  the  shameless  dishonesty  which  30 
often  characterizes  corporate  management  in  this  country, 
investment  in  stocks  and  particularly  in  "  industrial  '* 
stocks,  is  hazardous.  Yet  when  an  aroused  public  con- 
science, when  an  enlightened  commercial  policy,  shall  de- 
mand that  corporate  methods  be  honest,  that  corporate 
management  sliall  l)e  faithful,  tliat  the  acts  and  deeds  of 
corporations  in  so  far  as  they  affect  the  public  shall  he 
public,  and  when  fraud  ami  misrepresentation  in  connection 
with  cor])orate  enterprises  are  punished  as  certainly  and  as 
severely  as  when  they  occur  in  individual  dealings,  and 
wlien  those  who  are  entrusted  with  the  properties  of  great 
corporations  are  hehl  liable  as  trustees  thereof, — then,  not 
only  will  the  masses,  who  now  deposit  their  accumulated 


76  The  Trusts 

gains  in  savings  banks,  receiving  the  minimum  of  interest, 
find  fields  of  investment  which  will  he  safe  and  secure  and 
profitable,  but  business  will  receive  the  impetus  that  comes 
from  new  capital,  and  industry  will  have  a  further  stimulus. 

Thirteenth.  Even  under  the  present  lax  conditions  of  our 
corporate  methods,  and  notwithstanding  the  slight  incen- 
tive to  invest  in  trust  stocks,  trusts  are  able  to  float  thei? 
bonds  at  a  lower  rate  of  interest  than  that  at  which  their 
constituent  companies  were  able  to  borrow  money  before 
the  consolidation.  They  are  also  able  to  obtain,  by  the 
sale  of  their  stock,  an  ample  working  capital.  In  this  way, 
again,  they  are  a  conservative  force.  Their  bonds  run  for 
a  long  period  of  years  and  mature  at  a  fixed  date.  This 
saves  t];em  from  that  great  danger  of  independent  manu- 
facture, namely,  the  calling  in  by  banks,  in  times  of  busi- 
ness depression,  of  their  loans  to  thein.  The  honestly  man- 
aged and  conservatively  financed  trust  ought  to  have  a  less 
hazardous  and  perilous  career  than  most  manufacturing 
establishments  in  the  past  have  had. 

Fourteenth.  Trusts,  being  relieved  from  tlie  bitter  strug- 
gles of  competition, are  able  to  raise  and  maintain  llie  stand- 
ard of  quality.  It  must  be  conceded  that  the  ability  to 
raise  it,  implies  the  ability  to  lower  it.  This  is  one  of  the 
many  phases  of  the  monojjolistic  element  which  it  is 
charged  that  trusts  possess.  But  if,  for  the  purpose  of  ar- 
gument, we  admit  tliat  trusts  may  demand  to  a  great  extent 
whatever  price  they  wish  to  impose,  we  are  tlien  obliged 
to  concede  that  some  of  the  pressure  that  causes  adultera- 
tion is  largely  removed;  for,  on  this  theory,  whatever  they 
add  to  the  cost  of  production  in  furnishing  a  pure  article, 
they  can  recouy)  in  the  price.  It  is,  at  least,  ])k'asant  to  as- 
certain, as  the  result  of  investigation,  that  the  articles 
which  are  made  by  tl)e  trusts  that  have  been  longest  ia 
business  have  been  greatly  improved  in  quality.      Xotwith- 


The  Wastes  of  Competition  '^'j 

standing  some  charges  to  the  contrary,  which  have  been 
made  by  ^Ir.  Henry  D.  Lloyd  in  hi.<  book  entitled  ]Yeallh 
Against  Co)ninoiiireaIl/i,  it  is  the  general  experience  of 
those  who,  for  the  last  thirty  years,  have  used  kerosene, 
that  to-day  its  quality  is  better  than  ever  before;  that  there 
is  less  danger  of  ex])losion,  and  that  there  is  now  scarcely  a 
perceptible  disagreeable  odor.  Ernst  Von  Halle  asserts 
that  the  whiskey  trust  has  done  much  to  improve  the  qual- 
ity of  its  product;  and  consumers  throughout  the  countr}', 
although  they  may  denounce  the  sugar  trust,  will  almost 
universally  admit  that  the  quality  of  the  article  has  been 
bettered. 

Fifteenth.  By  no  means  least  of  the  benefits  of  trusts, — 
in  fact,  one  of  tlic  greatest  advantages  of  tliis  system  as 
conij)ared  with  that  which  ])revails  under  competition,  is 
the  opportunity  for  comparative  accounting  and  compara- 
tive athninistration.  Tliis  is  of  immense  benefit,  not  only 
to  the  trust,  but  to  the  consuming  public.  How  often 
when  one  struggling  competitor  sees  another  apparently 
succeeding  and  prosiJcring.  he  says  to  himself,  "I  womle.- 
how  he  does  it?  AVliat  i-  the  secret  of  his  success?''  I: 
is  evident  to  him  that  his  successful  rival  has  secured  some 
advantages,  but  the  latter,  if  a  shrewd  business  man,  keeps 
tlunn  to  himseir.  if  all  tlie  competitors  were  banded  to- 
getlier  in  a  tiaist  tlu'v  would  compart'  notes,  and  if  one  was 
found  t(.)  ])os>ess  a  1)etter  machine  than  the  others,  it  would 
])0  ])rocured  by  all.  If  another  was  found  to  have  a  cheaper 
ju'ocess  than  the  otlici'-.  it  would  be  ado])ted  by  the  wliole 
trust,  li  the  organization  of  a  tldrd  was  considered  more 
])crfect  than  that  of  the  others,  all  the  factories  and  plants 
forming  the  trust  would  have  an  organization  modelled 
after  it.  All  the  meinljers  of  tlie  trust  would  be  the  gain- 
ers, but  those  chietly  benetited  would  be  the  jmblic. 

So   much   for  the   economic  advanta^jes  of   trusts.       So 


^^  The  Trusts 

much  for  the  savings  of  the  enormous  wastes  of  competi- 
tion, which  trusts  can  bring  about.  But  what  of  the 
economic  disadvantages  of  trusts?  Perhaps  tlie  most  im- 
portant of  those  which  suggest  themselves  as  inherent  in 
these  organizations  is  the  loss  of  individual  initiative  and  a 
possible  smothering  of  individual  incentive.  The  trust  is 
largely  impersonal.  It  loses  much  of  the  good-will  that  its 
constituent  members  formerly  had.  There  are  many  who 
fear  that  it  will  not  be  a  beneficial  form  of  industrial  or- 
ganization, because  they  think  its  officers  and  servants  will 
not  work  so  faithfully  and  energetically  for  the  proprietors 
who  live  far  away  and  with  whom  they  never  come  in  con- 
tact, as  they  would  for  a  master  under  whose  eye  they 
worked.  There  is  an  even  more  widespread  belief  that 
trusts  are  crushing  out  individuality,  that  they  tend  to 
close  the  door  of  opportunity,  and  that  inasmuch  as  fewer 
men  can  be  heads  of  enterprises  and  independent  proprie- 
tors, there  will  be  no  incentive  to  them  to  do  their  best. 
It  is  felt  that  since  the  hope  of  securing  an  interest  as 
owner  of  a  plant  is  gone,  ambition  has  gone  with  it.  It  is 
claimed  that,  inasmuch  as  from  the  manager  down  to  the 
cheapest  laborer,  all  of  the  persons  who  are  actively  indenti- 
fied  with  the  work  of  the  trust  are  employees,  therefore 
there  is  no  longer  the  same  spirit  animating  them.  We 
believe  these  dangers  have  been  greatly  magnified.  Con- 
ceding that  comparatively  few  men  will  now  obtain  a  pro- 
prietary interest,  we  believe  that  the  prizes  of  business  life 
are  larger  than  they  ever  were,  and  business  op])ortunities 
are  greater.  The  larger  and  the  more  perfect  the  organ- 
ization, the  greater  the  incentive  and  the  surer  the  promo- 
tion of  the  capable.  Take,  for  instance,  great  railways,  our 
largest  and  most  ])erfect  organizations.  Is  there  not  there 
an  ample  stimulus  to  energy;  is  tliere  not  an  abundance  of 
opportunities  to  act  as  incentive  for  the  ambitious?      Are 


The  Wastes  of  Competition  79 

there  not  example?  innumera])le  of  men  who  have  entered 
in  the  lower  grades,  and  have  worked  themselves  up  to 
high  offices  and  to  positions  even  in  tlie  directorates?  The 
modern  trusts  offer  innumerable  opportunities  for  advance- 
ment and  the  greatest  of  prizes  for  which  to  struggle.  As 
in  all  our  previous  industrial  history,  they  will  he  won  by 
those  who  are  most  competent.  ''  Jle  will  bear  the  palm 
who  deserves  it."  We  have  had,  as  the  result  of  the  organ- 
ization of  the  great  Carnegie  Company,  a  marked  instance 
of  the  possibilities  still  open  to  young  men.  ("harles 
Schwab  was  chosen  president  of  this  gigantic  corporation. 
He  is  a  young  man  who  has  worked  his  way  up.  The  secret 
of  his  success  has  not  been  "  pull,"  but  "  push."  This 
attainment  of  this  high  place  is  not  the  result  of  accident, 
but  of  faithful  working  during  business  hours  and  of 
special  study  and  extra  work  when  away  from  the  mill  and 
factory.  This  instance  is,  indeed,  exceptional,  but  still 
there  need  be  no  fear  that  ambition  will  ])e  stifled  as  long  as 
there  is  opportunity  for  advancement.  Trusts  are  a  form 
of  organization  that  in  its  very  nature  is  a  scheme  of  or- 
derly and  regular  and  graded  promotion  of  the  etticient. 
A  century's  experience  with  business  under  corporate  con- 
ditions should  dispel  all  fears  that  the  servants  and  em- 
ployees and  officers  of  those  who  adopt  this  form  of  busi- 
ness organization  will  ])rove  indiPi'orcMit  to  the  interests  of 
their  emjdoyers.  There  are  no  em])loyees  more  faithful 
than  those  of  the  business  corporations  which  have  been  so 
common  during  the  last  thirty  years.  There  is  no  reason 
to  fear  that  the  servants,  officers,  and  employees  of  the 
greater  corporations  known  as  trusts  will  be  less  devoted  to 
the  interests  of  their  employers. 

A  second  evil  of  trusts  is  one  that  is  financial,  rather  than 
economic;  incidental  and  temixirary,  rather  than  inherent 
and   permanent.      It  is  the   likelihood  of  rash   and  wild 


8o  The  Trusts 

speculation  in  trust  stocks,  tending  to  produce  a  feverisli 
excitement  in  Inisiness.  But  this  is  an  evil  which  can  be 
corrected  by  the  exercise  of  control  over  corporations. 

There  are  many  other  evils  that  have,  in  the  past,  re- 
sulted from  trusts.  They  are  the  occasional  instances  of 
extortionate  prices,  of  unduly  restricted  production,  of 
diminished  wages,  of  depressed  prices  for  raw  materials. 
Besides  the.-e  there  is  the  possible  deterioration  of  the 
quality  of  the  product,  and  the  danger  of  political  corrup- 
tion and  domination.  All  of  these  are  phases  of  the  great 
question  of  nioiio])oly  as  an  element  of  trusts,  which  will  be 
considered  in  subsequent  chapters. 

To  sum  u]),  if  we  consider  the  two  elements  of 
making  and  mai'keting  which  together  fix  the  price  of  an 
article  to  tlie  consumer,  there  can  be  no  question 
as  to  the  wonderful  economy  of  the  trust  form  of  indus- 
try. Some  of  the  largest  manufacturers  in  their 
respective  lines  in  the  Ignited  States  have  been 
quoted  as  saying  that  the  consumer  often  pays  to  the 
retailer  twice  what  Avould  be  the  cost  of  the  article  and  a 
fair  profit  to  the  manufacturer.  The  great  savings  of  the 
trust,  which  we  have  enumerated,  make  this  statement  seem 
not  at  all  improbable.  It  is  not  diiucult  to  believe  that  if 
tliat  system  could  be  perfected,  many  commodities  could 
be  sold  for  about  one-half  their  present  niarket  price.  Are 
instances  of  the  savings  by  consolidation  necessary?  If  so, 
suppose  we  take  at  first  that  much-cited,  much-condemned 
trust,  the  earliest,  and  tlio  strongest, — th.e  Standard  Oil 
C'omjiany, — the  trust  that  has  been  criticised  so  much  Ijut 
which  lias  never  yet  claimed  to  be  the  '"'Slandered''  Oil 
Com])any.  Can  the  Standard  Oil  Conq^any  produce  more 
cheaply,  or  are  it?  ])rofits  due  wliolly  to  de])ressing  the  })rico 
of  crude  oil,  or  to  rai]rr)nd  discriminations  in  its  favor,  or 
to  new   inventions  which   would  have  been  adopted  had 


The  Wastes  of  Competition  8i 

tlicre  remained  a  great  niimljer  of  small  competitors  and 
Avhieh  would  have  produced  the  same  savings  when  used 
by  the  many?  How  does  the  Standard  Oil  Company  tend 
in  any  way  to  really  reduce  the  cost  of  production? 

"When  this  trust  was  Ijuing  investigated  Ijefore  the  House 
Committee  on  ]\Ianufactures,  in  the  summer  of  1888,  the 
following  statement  was  made  by  its  counsel,  in  his  argu- 
ment: 

"  The  Standard  Oil  Trust  offers  to  prove  by  various  witnesses, 
including  Messrs.  T'lagler  and  Kockefeller,  that  the  disastrous 
condition  of  the  refining  business  and  tlie  numerous  failures  of 
refiners  prior  to  1875  arose  from  imperfect  methods  of  refining, 
want  of  co-operation  among  refiners,  the  prevalence  of  specuhi- 
tive  methods  in  the  purcliase  and  sale  of  both  crude  and  refined 
petroleum,  sudden  and  great  reductions  in  prices  of  crude,  and 
excessive  rates  of  freight;  that  these  disasters  led  to  co-o})eration 
and  association  among  the  refiners,  and  tliat  such  association  and 
co-operation,  resulting  eventually  in  the  Standard  Oil  Trust,  have 
enabled  the  I'cfiners  so  co-oj)('rating  to  reduce  the  price  of  petro- 
leum products  and  thus  benefit  tlie  public  to  a  very  marked  de- 
gree and  that  tliis  has  been  accomplished: 

"  I.  By  cheapening  transportation,  both  local  and  to  seaboard, 
tlirough  perfecting  and  extending  the  pipe  line  system,  by  con- 
structing and  supplying  cars  with  which  oil  can  be  shipped  in 
bulk  at  less  cost  than  in  packages,  and  tlie  cost  of  packages  also 
be  saved;  by  building  tanks  for  the  storage  of  oil  in  bulk;  by 
purchasing  and  perfecting  terniinal  facilities  for  receiving, 
handling,  and  rc-sliipping  oils;  by  j)urch:ising  or  building  steam- 
tugs  and  lighters  for  seaboard  ov  ri\er  scr\icc,  and  by  building 
wliarves,  docks,  and  ware-houses  for  home  and  foreign  shipments. 

"  2.  That  by  uniting  the  knowledge,  experience,  and  skill,  and 
by  building  manufactories  on  a  more  perfect  and  extensive  scale, 
with  approved  machinery  and  appliances,  they  have  been  enabled 
to  and  do  manufacture  a  better  (piality  of  illuminating  oil  at  less 
cost,  the  actual  cost  of  manufacturing  having  been  thereby  re- 
duced about  tit)  per  cent. 

"  .3.  Tliat  by  tlie  same  methods,  the  cost  of  manufacture  in  bar- 
rels, tin  cans,  and  wooden  cases  has  been  reduced  from  30  to  GO 
{ler  cent. 


82  The  Trusts 

"  4.  That  as  a  result  of  these  savings  in  cost,  the  price  of  re- 
fined oils  has  been  reduced,  since  co-operation  began,  about  9  cents 
per  gallon,  after  making  allowance  for  reduction  in  the  price  of 
crude  oil,  amounting  to  a  saving  to  the  public  of  about  $100,- 
000,000  per  annum." 

The  amount  of  some  of  the  other  of  these  savings  in  this 
year,  1900,  may  be  easily  estimated.  In  1872  it  cost  $1.50 
to  transport  a  barrel  of  oil  from  the  wells  to  New  York. 
To-day  it  costs  only  about  fifty  cents.  The  annual  produc- 
tion of  the  company  is  about  35,000,000  barrels.  In  1872 
the  barrels  cost  $3.35  each;  to-day  they  cost  not  over  $1.25. 
Of  course,  by  no  means  all  of  the  oil  is  transported  in  bar- 
rels, but  the  saving  to  the  company  each  year  is  many  mil- 
lions. The  expense  of  the  tin  cans  used  by  the  company 
has  been  cut  in  two;  thereby  they  save  many  millions  each 
year.  It  lias  also  reduced  the  cost  of  the  wooden  kegs 
used  by  it,  so  that  it  annually  saves  about  $1,500,000.  In 
the  manufacture  of  many  of  its  by-products,  such  as 
naphtha,  lubricating  oil,  parafFme,  wax,  etc.,  the  trust  is 
compelled  to  use  large  quantities  of  sulphuric  acid.  It 
makes  its  own  sulphuric  acid  now,  and  instead  of  being 
obliged  to  pay  for  it  one  and  one-fourth  cents  per  pound, 
it  is  able  to  produce  it  for  eight  cents  a  hundred  pouiuls. 
As  shown  in  the  chapter  on  Prices  and  Potential  Comj)cti- 
tion,  the  decrease  in  the  price  of  kerosene  between  1872- 
1898  is  so  great  that  when  applied  to  the  annual  consump- 
tion for  the  latter  year  the  saving  to  the  jiublic  js  about 
$100,000,000. 

But  perhaps  more  conclusive  than  the  statements  of 
what  the  Stantlard  Oil  Company  would  prove,  or  than  the 
figures  just  mentioned,  is  the  inference  that  every  one  must 
draw  from  the  enormous  dividends  paid  by  the  concern. 
In  1872  none  of  the  oil  refiners  were  making  money.  About 
that  time  the  Htandard  Oil  Companies  of  Ohio  and  Penn- 


The  Wastes  of  Competition  8 


J 


sylvania  formed  an  alliance  with  two  other  large  refineries, 
the  Pratt  Co.  and  the  Atlantic  Refining  Co.  In  188;:^  the 
Standard  Oil  Trust  was  formed.  In  188T,  five  years  later, 
its  capital  was  $1)0,000,000,  largely  water,  hut  its  profits, 
according  to  the  report  of  a  Xew  York  legislative  commit- 
tee appointed  to  investigate,  were  $"^0,0()0,000.  Could  tlie 
trust  have  made  such  })rofits  if  there  were  not  economies  in 
making  and  marketing  occasioned  by  the  consolidation,  in- 
asmuch as  the  separate  companies  in  keen  competition  had 
none  of  them  prospered?  It  should  also  be  noted  that  the 
price  of  oil  had  decreased, — not  only  the  price  of  crude  but 
also  refined, — and  the  difference  per  gallon  between  the 
cost  of  crude  and  refined,  i.e.,  the  cost  of  refining  and  trans- 
})orting  to  the  seaboard,  was  1-1. o2  cents  in  18T2,  when  the 
alliance  was  formed;  and  in  1887,  the  year  the  profits 
were  $20,000,000,  the  difference  was  5.16  cents.  Can  this 
mean  anything  else  than  cheaper  production?  If  so,  we 
must  concede  to  the  Standard  Oil  Trust  what  has  never  yet 
been  conceded,  that  they  have  lowered  prices  even  more 
than  the  decrease  in  cost  of  production.  To-day  (April  2o, 
1900)  the  Standard  Oil  Company  is  capitalized  for  about 
$100,000,000.  It  is  still  largely  water,  notwithstanding 
the  fact  that  water  and  oil  are  not  supposed  to  mingle,  and 
yet  so  greal  are  its  ])rofits,  caused  by  the  savings  of  the 
consolidation,  that  its  stock  is  worth  500  in  the  open  mar- 
ket. Yet  oil  has  gone  down  still  further  in  price.  In 
1807  the  diiference  between  crude  and  refined  (the  cost  of 
refining  and  transporting  to  seal)oard)  was  4.01.  Is  not 
this  cumulative  evidence  tlint  the  consolidation  can  pro- 
duce chea])lv,  while  warring  competitors  could  not?  In  the 
three  years,  18!)(!.  1807,  1808,  the  Standard  Oil  Company's 
dividends  aggregated  ninety-four  ])er  cent  of  its  capitaliza- 
tion or  $91,115,000.  The  market  value  of  its  stock  to-day 
is  between  $500,000,000  and  $0'00,000,000. 


84  The  Trusts 

Let  us  now  look  at  the  savings  in  cost  of  service,  by  con- 
solidation of  telegrai)h  companies.  Prior  to  18G6,  our  tele- 
graj^hic  service  was  done  through  a  number  of  small  local 
companies.  To  send  a  message  across  the  country  it  was 
necessary  for  it  to  pass  through  the  hands  of  not  less  than 
a  half  dozen  com})anies.  In  18GG  they  were  all  consoli- 
dated into  the  Western  Union  Telegraph  Co.  At  this 
point,  inasmuch  as  we  are  now  engaged  simply  in  studying 
the  question  whether  or  not  consolidation  gives  cheaper 
cost  of  service  or  production,  it  is  perhaps  unnecessary  to 
give  particular  study  to  prices  or  rates,  but  it  is  helpful  for 
ns  to  do  so  in  order  to  see  if  profits  come  from  reduced  cost 
or  higher  charges.  George  Gunton  lias  collected  some 
valuable  statistics  in  an  article  written  by  him  for  TJie 
Polifical  Science  Quarierhj  for  September,  1888,  but  in- 
cluded by  him  in  a  book  issued  this  year  (1900).  "We  quote 
from  it: 

"rates    for    sending    TEX    WORDS    FROM    NEW    YORK: 

I80G  1SS8 

To  Chicago $2.20  $0.40 

"    St.  Louis 2.55  .40 

"     .St.   Paul 2.25  .50 

"     Cincinnati    l.iti)  .40 

"     New   Orleans :i.25  .60 

"     Galveston    , .      5.50  .75 

"     Minneapolis    2.t0  .60 

"     Buffalo    75  .25 

"     Washington,   D.    C 75  .25 

"     San  Francisco 7.45  1.00 

"     Oregon    10.20  1.00 

"    State    of   Washington 12.00  1.00 

Moreover,  in  ISOS.  when  ihis  country  sent  only  G.404,.'3t)5  mes- 
sages, it  cost  llie  coiupany.  on  an  average.  ().'i.4  cents  per  message; 
and,  in  order  lo  111:1  ke  a  jn'olil  on  tlie  capital  invested,  tlie  a\'erage 
price  charged  to  the  coiiiiuuiiity  was  .'sl.l)47  ]»er  message,  leaving 
41.3  cents  jiroiit  i)cr  iiiessagc     lii  1887,  when  the  company  serit 


The  Wastes  of  Competition  85 

47,;?n4,530  nic?:*agos,  tlio  averafro  cost  per  mcssap^e  was  23  cents; 
and  the  av(>rage  toll  to  the  coniiminity  was  reduced  to  30.4  cents 
per  message,  leaving  only  7.4  cents  profit  per  message.  It  will  thus 
be  seen  that  during  the  twenty  years  of  this  monopoly  the  average 
cost  of  messages  to  the  community,  to  all  ])oints.  has  been  reduced 
74.3  cents  per  message,  or  over  70  per  cent;  and  that  the  profits 
have  been  reduced  33  cents  per  message.  In  other  words,  the  total 
cost  of  the  service  to  the  community  to-day  is  10.9  cents  per  mes- 
sage less  tlian  the  profits  alone  were  before  the  organization  of 
this  company." 

The  cheapening  of  tlie  cost  oC  transportation  as  a  result 
of  combination  and  consolidrttion  is  equally  worthy  of  at- 
tention. In  his  address  before  the  Chicago  Conference  on 
Trusts  in  September,  .1899,  Mr.  H.  T.  Xewcomb,  of  the 
T".  8.  Census  Oflice,  said: 

"  The  decline  in  railway  ch.arges  in  the  United  States  has  been 
continuous  and  e\tensi\e.  The  average  rate  per  ton  of  freight 
carried  one  mile,  measuri'd  in  gold,  bus  declined  from  nearly  two 
cents  in  ISt'u  to  less  than  eight  mills  in  1S!)8,  the  last  year  cov- 
ered by  the  rejiorts  of  the  st^itistician  to  the  Interstate;  Commerce 
Commission.  The  jiriee.  of  wheat  at  the  jiort  of  New  Yoi'k  dur- 
ing 1807  would  pay  f(ir  the  Irtinspoitatinn  of  but  2.S4  bushei-  ol 
■wheat,  from  Chicago  to  New  York  at  the  rates  of  tlnit  year;  in 
18!)7  the  ])i-ice,  though  consi(!er:(bly  lower  than  in  ISO?,  wouhl 
pay  for  moving  six  buslu^ls.  In  other  words,  the  decline  in  the 
railway  rat^'  fi'om  Chicago  to  New  \'ork  \\  as  twice  as  gi-eat  as 
the  decline  in  the  jirice  of  wheat.  The  decline  in  ])asseiiger  rates 
from  1S71  to  1S08  amounts  api)arently  to  2')  ])er  cent;  but,  unlike 
that  in  freight  rates.  i>  iKit  >ii-eeptible  of  satisfactory  statistical 
presentation.  The  >ubstantial  identify  of  tlie  service  necessary 
to  permit  the  use  of  the  statistical  method,  has  not,  however,  been 
preserved.  The  dollar  tliat  purclia>es  transportation  in  a  modern 
train,  i)rovided  with  automatic  eoui)!ers  and  air  brakes,  traversing 
at  sixty  miles  |iei'  hour,  a  track  coiujioscd  of  I'essemer  steel  rails 
weighing  100  pounds  to  the  yard,  and  guarded  by  block  signaling 
apparatus,  purchase-  \astly  moic  than  did  the  dollar  ])aid  for 
]iei-siinal  f rainportatiou  a  few  decades  ago.  won  though  the  dis- 
tance ti-averseii  b(>  but  little  greater  at  pre-enl.  Th(>  public  has 
preferred    to    ha\'e    improved    acionniiotlafions    and    better    service 


86  The  Trusts 

rallicr  tlian  very  much  lower  charges,  and,  as  usual  in  America, 
lias  had  its  way.  The  same  rise  in  the  standard  of  living  that  has 
given  the  American  farmer  his  top-buggy,  his  piano  in  the  parlor, 
his  Sunday  suit,  and  Brussels  carpet,  has  given  him  the  luxurious 
coaches  and  well-ballasted  roadbeds,  the  safety  and  the  speed  of 
modern  passenger-service. 

But  has  the  competition  of  rival  routes  produced  these  reduc- 
tions in  rates  and  improvements  in  the  quality  of  service?  I  think 
not. 

Such  competition  has  caused  numerous  extravagant  expenses; 
it  has  made  railway  business  unnecessarily  costly,  and  some  one 
must  have  paid  the  bills.  Let  us  examine  some  of  these  expenses, 
though  it  is  not  easy  to  secure  authentic  statistics,  and  those 
available  serve  to  suggest  only  the  possible  aggregates.  The  In- 
terstate Commerce  CJommission  has  reported  that  nine  roads  paid 
out  an  aggregate  sum  of  more  than  one  million  dollars  in  a  single 
year  as  commissions  for  securing  competitive  passenger  business, 
and  it  is  known  that  as  much  as  $20.70  has  been  paid  to  secure  a 
single  second-class  passenger  from  this  city  to  San  Francisco.  The 
multitude  of  outside  agencies  and  traveling  agents  maintained 
solely  for  the  purpose  of  securing  business  for  their  respective 
lines  that  might  otherwise  traverse  those  of  their  competitors  in- 
volves an  expenditure  so  gi'eat,  even  during  periods  of  comparative 
harmony,  that  it  has  been  deemed  necessary  to  restrict  their  num- 
ber by  contract.  An  agreement  in  force  for  a  considerable  time 
limited  to  eight  the  number  of  agencies  that  might  be  main- 
tained in  New  York  City  by  each  of  the  nine  roads  competing  for 
westward  bound  traffic  from  that  city.  As  it  is  a  fact  of  ordinary 
observation  that  such  agencies  always  cluster  in  particular  regions 
and  around  particular  corners,  it  is  obvious  that  a  system  of  joint 
agencies  would  afford  the  public  equal  accommodation  at  lower 
cost. 

"  During  the  periods  of  unbridled  competition,  popularly  known 
as  '  rate  wars,'  each  participating  carrier  sends  its  freight  and 
passenger  agents  to  every  important  city  in  the  country  at  a 
total  expense  for  rents,  clerk  hire,  advertising,  etc.,  that  must  be 
enormous.  Four  roads  operating  westward  from  ('liicago  are 
known  to  have  expended  $],2H.'5,585  for  outside  agencies  and  ad- 
vertising in  a  single  year,  during  which  rates  were  fairly  main- 
tained, vhilo  (luring  an  equal  jjcriod  one  road  terminating  at  Xew 
York  City  expended  $871,291  for  similar  purposes." 


The  Wastes  of  Competition  Sy 

Unquestionably    trusts    can,    as    a   rule,    produce    more 
cliea})]y  than  small  concerns.      Unquestionably  they  can, 
as  a  rule,  undersell  small  competitors.      Unquestionably 
they  can,  as  a  rule,  give  the  consumer  the  same  or  better 
goods  at  lower  prices.      What  the  saving  by  tliis  method 
would  aggregate  can  neither  be  accurately  computed  nor 
even  approximately  estimated.      But  it  cannot  be  doubted 
that  annually  countless  millions  are  spent  in  useless  adver- 
tising, in  paying  unneeded  commercial  travelers,  in  need- 
less transportation,  in  the  insurance  and  care  and  storage 
of  superfluous  stocks,  in  making  good  the  losses  of  bad 
debts,    in    paying    for    the    increased    expense    of    poorly 
equipped  plants,  and  in  divers  other  ways.     By  no  means 
all  of  the  expenditure  for  these  purposes  is  a  waste,  but 
very  much  of  it  is.     A  large  part  of  it  is  saved  by  the 
methods  of  trusts.      Cheaper  commodities  to  the  consumer 
are  certainly  made  possible.     But  does  he  get  them?    Does 
the  producer  pocket  all  this  saving,  or  does  the  community 
get  some  of  it?      The  community  asks:    "  AVill  not  the 
trust  producer  having  the  sole  supply,  or  the  practical  con- 
trol, of  this  particular  commodity  easily  persuade  himself 
that  the  saving  is  of  his  own  creation,  and  that  therefore 
he  is  entitled  to  all  of  it  as  increased  profit?   Will  he  not, 
indeed,  eventually  possess  a  monopoly,  having,  by  reason  of 
his  very  ability  to  undersell,  driven  out  all  competitors; 
and  Avill  he  not,  then,  instead  of  reducing  the  price  in 
accordance  with   the  reduced  cost,  raise  the  price  to  an 
extortionate  point?  " 


CHAPTER  V. 
WHAT    IS    MONOPOLY? 

A  TRUST  is  a  gigantic  industrial  enterprise,  but  it  is  more 
than  that.  One  should  never  lose  sight  of  the  fact  that  it 
is  a  union  of  producers  who  were  formerly  competitors,  and 
that  frequently  it  is  a  consolidation  of  all  or  nearly  all  those 
who,  prior  to  the  formation  of  the  trust,  "were  competitors. 
He  who  sees  in  trusts  only  big  enterprises,  is  as  blind  as 
would  be  he  who,  standing  on  the  edge  of  Vesuvius's  crater 
when  the  volcano  was  in  eruption,  would  see  it  only  as  a 
big  hole;  or  as  would  be  one  who,  swimming  in  the  ocean, 
might  be  attacked  by  a  sbark,  and  would  see  it  only  as  a 
big  fish.  The  manner  in  which  trusts  obtain  their  size  and 
in  which  they  will  probably  use  it,  is  quite  as  important  as 
the  size  itself. 

The  wastes  of  competition  are,  as  we  have  seen,  one  of 
the  causes  of  trusts,  as  well  as  of  all  other  increases  in  the 
size  of  industrial  organizations;  yet  a  trust  attains  its  size 
not  by  waiting  for  competition  to  slowly  kill  off  the  weak 
competitors,  but  by  anticipating  and  forestalling  this  ex- 
tinction. Competition  is  the  cause,  but  the  paradoxical 
result  is  an  attempt  to  stop  competition.  Trusts  are  com- 
binations of  competitive  producers  for  the  purpose  of  end- 
ing competition  between  them;  and  tlie  result  is  generallv 
a  territory  of  greater  or  less  extent  in  which  tliere  is  no 
active  competition  whatever.  Tliis  al)olition  of  active  com- 
petition between  existing  competitors  is  not  infrequently 


What  is  Monopoly  ?  89 

called  monopoly, — a  word  tliat  is  an  epitome  of  favoritism, 
partiality,  greed,  extortion,  and  oppression. 

There  can  be  no  salisfaetory  talk  until  one  knows  what 
he  is  talking  about;  jio  useful  discussion  until  the  terms 
which  arc  to  be  used  are  clearly  understood,  and  the  words 
which  are  to  l)e  emiiloyed  are  accurately  defined.  The  word 
"monopoly"  will  be  used  millions  of  times  in  the  discus- 
sion of  trusts.  It  will  bo  the  summarized  indictment  ot 
those  who  think  trusts  evil  and  only  evil.  It  will  be  tho 
substitute  for  evidence  and  proof — the  "  So,  there  now," 
of  those  wliosc  convictions  are  stronger  than  the  arguments 
which  they  advance.  What  is  monopoly?  It  is  necessary 
to  know,  for  in  the  coming  presidential  campaign  it  will  be 
repeatedly  laid  down  as  axiomatic  that  trusts  are  monopo- 
lies. 

From  time  immemorial  English  and  American  courts 
have  passed  judgments  against  monopolies,  and  the  consti- 
tutions of  our  states  as  well  as  the  spirit  and  genius  of  our 
people  have  dechired  them  repugnant  to  free  institutions. 
What,  then,  is  this  odious  thing?  Monopoly,  etymologi- 
cally,  means  /he  sole  (power  of)  selling.  A  monopoly  in 
any  commodity  exists,  in  reality,  only  when  one  person  or 
association  of  persons  has  the  exclusive  aJ)iiiti/,  pnver,  or 
leqal  rigid  to  sell  that  commodily.  Jf  any  one  else  has  tho 
power  and  ability  as  well  as  the  right-  to  sell  it,  no  monopoly 
exists,  cv(m  it'  only  one  ])ers(.)n  docs  in  fact  engage  in  its 
sale.  Mouopohj  is  sole  poicrr:  iiunuipohj  is  e.rrlusinn.  The 
dustv  tomes  of  the  law  are  tilled  with  decisions  and  rulings 
concerning  monojjoly,  from  the  time  ot  Coke  to  this  day; 
but  in  these  decisions,  at  l(\l^t  down  to  within  very  recent 
years,  '"monopoly'"  has  had  even  a  narrower  meaning  than 
that  above  given.  It  may  fairly  be  said  that  the  legal 
meaning  of  the  word,  as  commonly  used  by  judges  and 
courts,  was  for  centuries  "'  the  S'llc  legal  rigid  Id  sell  a  ecr- 


90  The  Trusts 

iain  commodUy,  or  in  a  certain  locality. ''  The  law  concern- 
ing monopolies  and  restraint  of  competition  has  been  thus 
summarized  in  the  American  and  English  Encyclopedia  of 
Law;  and  in  the  same  work  it  is  declared  that  an  agree- 
ment between  two  parties  to  prevent  competition  between 
themselves,  and  which  leaves  each  party  in  its  respective 
territory  open  to  the  free  competition  of  all  other  corpora- 
tions or  individuals  who  may  choose  to  engage  in  the  busi- 
ness, is  not  a  monopoly.  (Am.  &  Eng.  Encyc.  of  Law,  1st 
Ed.,  Tit.,  Monopoly.)  This  doctrine  has  been  slightly 
modified  in  recent  cases,  as  will  be  seen  later.  The  mon- 
opolies that  the  courts  had  to  consider  for  several  hun- 
dred years — down  to  within  the  past  century — were  exclu- 
sive rights  granted  to  one  person  or  a  few  persons  in  that 
which  was  before,  a  common  right.  They  were  special  and 
exclusive  privileges  in  trade  bestowed  by  the  king  or  other 
sovereign  power,  giving  to  the  favored  person  the  sole  right 
of  trading,  and  absolutely  denying  that  right  to  others, — 
restraining  the  latter  of  the  commercial  freedom  and  lib- 
erty they  had  before  enjoyed  and  hindering  them  in  their 
lawful  trade.  The  disability  of  the  latter  was  a  legal  dis- 
ability, created  not  naturally  but  arbitrarily,  enforced  not 
by  economic  laws  but  by  the  powers  of  tyranny.  Such 
monopolies  are,  indeed,  repugnant  to  free  institutions. 
They  arc  truly  violations  of  personal  liberty.  English  juris- 
prudence dealt  for  centuries  with  this  kind  of  monopoly, 
and  it  sliould  never  be  forgotten  that  its  decisions  concern- 
ing 7iionopolies  apply  only  to  this  class  of  trade  restrictions. 
Xot  until  the  closing  ([uarter  of  tlie  nineteenth  century  was 
industry  so  centralized  that,  without  any  grant  of  exclusive 
right  l)y  the  sovereign,  any  one  field  of  it  was  so  com- 
pletely in  the  possession  and  control  of  any  one  person  or 
cor])oratif)ii,  tliat  it  seemed  as  if  there  was  a  real  ina])ility 
to  undertake  successfully  to  compete  in  it.     The  decisions, 


Wluil  is  Monopoly  ?  91 

therefore,  on  monopoly  rendered  in  these  earlier  days  are 
not  controlling.  They  may  be  to  some  extent  analogous, 
but  they  are  not  strictly  applicable.  What  has  been  con- 
demned in  tliese  decisions  by  the  courts  for  several  cen- 
turies, therefore,  is  another  thing  than  that  which  is  now, 
popularly  called  monopoly.  It  is  not  the  ''  trust  "  that 
has  been,  in  these  early  decisions,  declared  repugnant  to 
the  institutions  of  a  free  people,  and  inconsistent  with 
li])crty;  nor  is  it  anything,  however  great  its  power,  that 
has  aecjuircd  its  })0\ver  only  in  the  bitter  struggle  of  com- 
petition and  without  the  denial  to  others  of  equal  rights. 
"W'e  cannot  cause  the  dissolution  of  trusts  or  the  punish- 
ment of  their  ollicers  by  citing  tliese  old  judicial  decisions 
C()ne:'rniug  "  moiu)p()lies,"  which  were  legally  different,  al- 
though doubtless  laws  and  decisions  against  contracts  in 
restraint  of  tratie  and  unlawful  coiid)inations  and  conspira- 
cies, are  precedents  to  be  followx^d. 

On  tlie  other  hand,  sini])ly  because  trusts  are  not  mon- 
opolies, according  to  old-established  legal  definitions,  one 
should  not  take  it  for  granted  that  they  contain  no  evils; 
or  that,  for  that  reason,  they  luive  not  the  sole  power  of 
sale  over  the  commodities  they  ]iroduce,  with  a  power  to 
fix  prices   at   will  and   to   control   production  arbitrarily. 
They  may  or  may  not  have  this  power.     The  mere  fact 
l!;;it   they  are  not  legal  '"' mono]iolies,"'   as  the  term  was 
used  fur  ecTituries.  does  not  d(>termine  tluit  question.      The 
sover(>ign  may  not  give  a  person  an  errJuf^ivc  right  to  sell, 
but  if  om'  in  any  way  acquires  the  r.rrhr^ire  power  to  sell, 
otlu'rs  will  1)1'  injured  fullyasmuch  as  if  the  sovereign  recog- 
nized in  him  an  r.ri-hi.<ivp  riqlif — ])ro])ably  more  so,  becauso 
the  c.rclusirc  jxnrcr  would  l)rool<  no  eom])etition  and  would 
sliow  liltU^  or  no   nui-cy:   while   tlie  exr]u>iirc   rigid  which 
was  granted  might   he  infringed   upon.     The  changed  in- 
dustrial conditions  of  the  nineteenth  century  have  brought 


92  The  Trusts 

it  a])Out  that  not  infrequently  combinations  of  men  and 
great  corporations  have  been  able  apparently  to  secure  all 
the  means  of  production  and  distribution  in  a  certain  in- 
dustry, and  to  have  apparently  the  sole  power  of  selling  or 
producing;  and  our  legal  conceptions  and  Judicial  defini- 
tions of  monopoly  are  rapidly  adjusting  themselves  to  that 
condition,  real  or  supposed,  which  may,  perhaps,  be  best 
described  as  '^'^  practical  monopoly."  Thus  .Judge  Barrett, 
of  the  Supreme  Court  of  Xew  York,  in  the  case  of  The 
People  vs.  The  Xorth  Eiver  Sugar  Refining  Company,  de- 
clared that  monopoly  is  ''  any  combination,  the  tendency 
of  which  is  to  prevent  competition  in  its  hivad  and  general 
sense,   and   to   control,    and   thus,   at   icill,   enhance   prices 

to    the    detriment    of    the   public Xor   need   it   be 

permanent  or  complete.  It  is  enough  that  it  may  be  either 
temporarily  or  partially  successful.  The  cjuestion  in 
the  end'  is,  'Does  it  inevitably  tend  to  public  injury?''' 
This  was  the  definition  of  monopoly  which  Judge 
Barrett  gave  in  the  Sugar  Trust  case^,  as  being  appli- 
cable to  the  industrial  condition  created  by  that  trust 
which,  he  said,  "  can  close  every  refinery  at  will,  close  some 
and  open  others,  limit  the  prices  of  raw  materials  (thus 
jeopardizing,  and  in  a  considerable  degree  controlling,  its 
production),  artificially  limit  the  production  of  refined 
sugar,  enhance  the  price  to  enrich  themselves  and  their 
associates  at  the  public  expense,  and  depress  the  price  when 
necessary  to  crush  out  and  impoverish  a  foolhardy  rival." 
Tn  ilie  ease  of  Richardson  vs.  Buhl  the  Supreme  Court  of 
Michigan  said:  ''All  combinations  among  persons  or  cor- 
poraliiniy  fnr  the  purpose  of  raising  or  contrnlling  lite  prices 
of  merrliau'lisf  or  niiy  of  (lie  nereysaries  af  life,  are  vio- 
7ioj/ulies  atid  itilolcrnble,  and  o'lf/hl  to  receive  IJir  condem- 
nation iif  all  couvls.''  Cliici'  Ju-tice  Fuller  in  deliver- 
ing the  opinion  of  the  Supreme  Court  in  the  Sugar  case 


What  is  Monopoly?  93 

(the  Knight  case),  said:  "All  Ihe  authorities  agree  that  in 
order  to  vitiate  a  contract  or  combination,  it  is  not  essen- 
tial that  it  shall  he  a  complete  monopoly;  it  is  sufficient  if 
it  reallij  lends  to  (hat  end  and  to  deprive  the  public  of  the 
advantages  irhich  follow  free  competition.''^ 

Xot  only  Jo  the  opinions  of  tlie  judges  of  our  courts  rec- 
ognize that  under  our  modern  industrial  conditions  we 
may,  without  the  grant  to  certain  persons  of  exclusive 
privileges  by  the  sovereign  power,  be  made,  nevertheless, 
the  victims  of  a  grinding  and  merciless  and  extortionate 
monopoly,  but  the  popular  comprehension  of  this  fact,  or 
the  popular  fear,  has  caused  statutory  definitions  of  mon- 
opoly to  be  laid  down  along  the  same  lines. 

Monopoly,  whether  it  be  the  result  of  exclusive  privileges 
granted  by  the  sovereign,  or  simply  the  sole  power  of  pro- 
duction and  selling,  which  comes  from  the  possession  of  all 
the  existing  agencies  for  cheap  production  and  distribution, 
is  the  curse  of  industry  and  the  bane  of  liberty.  In  earlier 
chapters  we  have  shown  the  evils  and  wastes  of  competi- 
tion. Xo  painter  can  portray  in  colors  that  are 
sufficiently  lurid  the  wretchedness  and  misery  and 
poverty  that  often  result  from  excessive  competi- 
tion. Xo  tongue  is  eloquent  enough  to  describe  the  evils 
tliat  frequently  result  from  this  system  of  industry,  with 
its  tendency  to  develoj)  the  selfish  characteristics  of  human 
nature  aiul  to  produce  heartlessness  and  indifference  to- 
wards the  welfare  of  others.  Xo  stati:^tieian  or  economist 
can  compute  or  measure  the  enormous  waste  and  destruction 
occasioned  by  competition.  But  worse  than  competition  is 
monopoly, — the  paralysis  of  industry  and  the  death  of 
liberty.  ^lonopoly  i<  the  sole  ])ower  to  sell, — the  complete 
lack  of  effective  competition.  Witli  all  its  faults  and  evils 
and  wastes  of  excessive  com]X'titi(Ui,it  is  competition, never- 
t!ielc;-s,  which    is   the   ij^real   incentive  to   tlie   creation   of 


94  The  Trusts 

wealth  and  the  stimulus  to  all  our  progress.  It  is  compe- 
tition between  sellers  that  has  quickened  invention  and 
skill  and  given  to  us  lahor-saving  machines  and  processes. 
It  is  competition  that  urges  improvement  in  the  quality  of 
the  products;  it  is  competition  that  stimulates  production 
to  supply  the  enlarged  demand;  it  is  largely  competition 
that  has  increased  the  employment  of  labor,  raised  wages 
and  improved  the  condition  oi  the  laboring  classes.  Ex- 
cessive competition  is  the  fever  that  burns  and  kills;  but 
complete  lack  of  competition — monopoly — is  rigor  mortis. 
In  earlier  chapters  we  have  pointed  out,  and  in  succeed- 
ing chapters  we  will  continue  to  point  out,  numerous  ways 
in  which  the  modern  trusts  that  are  formed  for  the  pur- 
pose of  controlling  competition  between  those  who  enter 
into  them,  are  of  economic  value;  many  ways  in  which  they 
are,  or  may  be,  of  great  benefit  to  consumers,  as  well  as 
to  producers;  many  ways  in  v»-hich  they  may  be  of  advan- 
tage to  the  wage  earners.  We  will  show  how  the  hosts  that 
will  be  displaced  from  positions  and  employment  by  these 
improved  methods  of  organization  will,  or  may, in  time, find 
new  situations;  and  how  opportunities  of  employment  will 
become  more  numerous,  and  the  production  of  wealth  more 
abundant.  But  there  is  one  essential  element  to  the  real- 
ization of  all  these  beneficent  results;  that  essential  is  the 
lowering  of  prices  in  proportion  to  the  cheapening  of  the 
cost  of  production.  If  by  means  of  new  discoveries  or  new 
processes  or  new  methods  of  organization,  five  hundred  men 
can  do  the  work  that  formerly  required  a  thousand,  and  i£ 
the  cost  of  the  article  is  reduced,  the  community  will  re- 
ceive no  advantage  unless  the  price  be  reduced  accordinglv. 
What  cares  the  consumer  how  much  the  cost  of  production 
is?  His  concern  is  tlie  selling  price — the  cost  to  him.  I! 
with  the  displacement  of  labor  and  the  cheapening  of  the 
product  there  be  a  lowering  of  the  price,  there  will  be  a 


What  is  Monopoly  ?  95 

consequent  increase  in  consuniplion.      At  least   some  of 
the  five  Imndred  displaced  laborers  will  find  new  employ- 
ment in  the  ell'ort  to  supply  the  increased  demand.      The 
rest  will  in  time,  doubtless,  find  employment  in  other  in- 
dustries.   The  community  will  have  the  cheaper  and  more 
abundant  product;   the  wage-earner  will  obtain  more  con- 
stant work  and  remunerative  wages.     But  if  the  cost  of 
the  product  be  cheapened  and  the  five  hundred  laborers  are 
dis])laced  and  the  price  be  not  reduced  proportionately, 
there  will  be  no  increase  in  the  consumption,  but  a  con- 
stantly growing  decrease;   for  the  general  body  of  consum- 
ers will  have  no  incentive  to  increase  their  consumption  of 
the  product,  and.  the  five  hundred  displaced  laborers,  and 
all  those  dependent  upon  them  being  now  without  wages, 
without  money  and  without  the  price,  arc  removed  from 
the  ranks  of  consumers.     The  demand  for  the  product  has 
not  only  failed  to  increase,  but  has  begun  to  decrease.     The 
lessening  of  the  demand  means  the  discharge  of  more  labor- 
ers, who,  without  employTnent  and  without  means  to  pur- 
chase, still  further  decrease  the  army  of  consumers.     The 
increasing  number  of  unemployed  and  the  relatively  small 
amount  of  work  mean  an  inevitable  reduction  of  the  wages 
of  those  who  are  retained,  and  a  furtlier  decrease  in  the 
demand  or  purchasing  power  of  the  community.      The  de- 
crease in  the  demand  for  the  manufactured  article  means  a 
decrease  in  the  demand  for  the  raw  material  from  which 
the  manufactured  article  is  made,  and   this  moans  lower 
prices   to   farmers  and   planters,  lack  of  employment   for 
farm-hands,  less  demand  for  agTicultural  implements,  and 
the  closing   of   factories   in   whicli   these   implements   are 
made.      The  inevitable  result  is  more  men  out  of  employ- 
ment, wages  again  loworod.  a  fTirthor  decrease  in  the  de- 
mand. lesscTiing  of  ])roduction,  lack  of  purchasing  power  on 
tlio   lavi   of   the  community,   depression,   stagnation,   and 


96  The  Trusts 

fnially  bankniplcy,  miser}',  want,  and  despair.  The  only  cor- 
rective, tlie  only  revivifying  influence  is  a  lowering  of 
prices  in  accordance  with  the  cheapening  of  the  production. 
We  have  already  referred  to  the  action  of  the  American 
Steel  and  Wii'e  Company,  which,  in  the  spring  of  1900, 
suddenly  shut  down  twelve  of  its  mills  and  threw  out  of 
employment  4,000  of  its  laborers.  This  was  done  less  than 
two  months  after  the  head  of  the  concern  had  uttered 
roseate  predictions  as  to  the  condition  of  the  company  and 
as  to  the  great  demand  for  the  goods  manufactured  by  it. 
The  reason  given  for  this  shut-dow^n  w'as  over-production. 
The  course  that  followed — a  very  proper  one — was  the  re- 
duction of  prices,  some  twenty-five  and  some  thirty-three 
per  cent.  Tliere  was  a  widespread  belief  that  the  action 
was  taken  for  the  purpose  of  depressing  the  market  value 
of  the  stocks  of  the  company,  yet  subsequent  events  seem 
to  establish  the  fact  that  the  reason  given  was  the  true 
one;  that,  if  there  have  been,  at  any  time,  any  improper 
statements  made  by  the  trust  officials,  they  were  made  when 
they  represented  that  the  prospects  of  the  company  were 
flourishing.  Months  before  this  action  was  taken  by  the 
American  Steel  and  Tire  Company  that  shrewd  old  popu- 
list, cx-Congressman  Jerry  Simpson,  who  has  been  the  butt 
of  ridicule  of  Eastern  economists  as  well  as  of  Wall  Street 
])lungers,  predicted  this  very  action  on  the  part  of  the  wire 
inist.  On  February  14,  1900,  at  the  Anti-Trust  Confer- 
ence held  in  Chicago,  Jerry  Simpson  said: 

"  Take,  for  example,  articles  of  common  consumption,  particu> 
larly  in  the  \\'eslern  States — barbed  wire  and  Avire  nails  (these 
are  the  products  of  the  American  Steel  and  Wire  Company).  The 
enormous  advance  in  jirice  is  causing  a  rapid  decline  in  con- 
sumption; tlie  factories  and  the  storcliouses  of  jobbers  and  re- 
tailers are  filling  with  supi)lies.  Tt  is  reported  that  in  the  Eastern 
States  farmers  are  returning  to  the  primitive  rail  fences.  Hence 
we  shall  liea.r  of  tlie  wholesale  discharge  of  men  employed  by  the 


What  is  Monopoly  ?  97 

trust;  and  tlioy  being  without  work  and  without  money  to  buy 
tlie  products  of  tlie  farm,  will  thus  allVet  tlie  farmers  injuriously, 
and  so  on  througli  the  wliole  gamut  of  industrial  activity.  It  is, 
therefore,  more  than  probable  that  before  many  months  elapse 
the  parrot  cry,  '  over-production,'  \\  ill  be  heard  in  the  land,  while 
the  gaunt  wolf  of  poverty  sits  upon  hundreds  of  thousands  of 
thresholds." 

With  what  wonderful  quickness  Jerry  Simpson's  proph- 
ecy has  been  fulfilled! 

The  truth,  then,  is  that  if  trusts  are  run  as  monopolies 
instead  of  being  economically  an  advantage  to  the  public, 
they  will  occasion  a  frequent  recurrence  of  the  evils  of  com- 
petition. High  prices  will  cause  that  which  is  called  over- 
production, namely,  an  excess  of  production  over  the  de- 
mand at  the  prices  quoted,  and  we  will  also  have  shut-downs 
and  low  wages,  men  out  of  employment,  and  all  other  forms 
of  industrial  wretchedness.  These  evils  will  come  whenever 
trusts  are  run  upon  the  monopolistic  principle  and  when- 
ever prices  are  put  up  or  kept  up  above  the  point  of  fair 
profit. 

But  a  lowering  of  prices  always  causes  an  increased  de- 
mand and  an  enlarged  output,  which  in  turn  mean  more 
employment  for  labor,  which  itself  results  in  higher  wages, 
which  again  means  an  increased  purchasing  power  on  the 
part  of  the  wage-earners,  and  a  further  denumd,  and  a  still 
greater  abundance  of  production,  as  well  as  a  larger  market 
for  raw  materials,  higher  prices  for  farm  products,  an  in- 
creased need  of  agricultural  im])lements,  a  larger  demand 
for  farm  labor,  higher  wages,  and  a  further  enlargement 
of  the  consuming  and  purchasing  powers  of  the  farmers 
and  planters  and  farm  Uiborers  for  manufactured  {)roducts; 
and  so  on,  in  one  endless  chain  of  plenty  and  prosperity. 
Thus,  wliatever  ti^nds  to  lower  prices,  provided  it  is  the 
result  of  chea])er  production,  of  lal)or-saving.  and  not  of 
arbitrary  wage-reduclion  or  arbitrary  depression  of  prices 


98  The  Trusts 

of  raw  materials,  means  the  industrial  welfare  of  all  classes, 
producers  and  consumers,  employers  and  employees,  manu- 
facturers and  farmers,  old  and  young,  rich  as  well  as  poor. 
It  is  apparent  that  there  can  be  no  beneficial  lowering 
of  prices  unless  there  is  a  cheapening  of  the  cost  of  pro- 
duction. It  has  been  shown  how  trusts  can,  generally, 
produce  much  more  cheaply  than  individual  competitive 
producers.  Low  prices  cannot  exist  unless  there  is  cheap 
production.  The  cheapest  production  makes  possible  the 
lowest  price.  The  cheapest  production,  provided  it  is  not 
the  result  of  the  degradation  of  human  labor,  and  if  fol- 
lowered  by  the  lowest  price,  means  the  greatest  prosperity. 
The  proper  policy,  then,  to  pursue  with,  reference  to  trusts 
is  to  endeavor  to  obtain  all  their  economic  advantages  and 
yet,  by  all  means,  to  guard  against  monopoly.  If  the 
monopolistic  element  can  be  wholly  eliminated  from  them, 
they  may  become  one  of  the  greatest  industrial  boons  in  the 
world's  history;  if  they  are,  in  practice,  monopolies,  even 
though  not  essentially  so,  they  are  the  greatest  curse 
that  has  fallen  upon  the  race  since  it  was  condemned  to 
eat  its  bread  in  the  sweat  of  its  face.  If  it  is  not  possible 
to  have  trusts  "without  monopolies,  trusts  must  be  de- 
stroyed, or  else  industry  will  be  ruined  and  liberty  over- 
thrown. Human  nature  is  unable  to  exercise  unrestrained 
power  with  fairness.  Such  power  is  sure  to  be  abused  and  to 
Ije  applied  tyrannically.  The  power  over  industry  is  the 
greatest  of  all  powers.  If  you  can  control  a  man's  liveli- 
liood,  you  control  his  life.  If  you  control  his  opportuni- 
ties for  work,  you  control  all  his  energies  and  faculties. 
If  you  control  those  things,  you  control  all  his  liberties; 
he  will  not  long  retain  liberty  of  tiiouglit  or  liberty  of 
conscience.  If  the  trusts  of  to-day  are  really  monopolies — 
if  tliey  are   in  eifect  inonopolies — then  have  we  lost  our 


What  is  Monopoly?  99 

liberties;    tlien   in   ]ilac('  of  rour  million  slaves,  tliere  are 
eiglit}'  million.     Are  we  to  luive  a  nation  of  white  slaves? 

The  })eriineiit  inijuiry,  the  real  lui'ning  point,  the  crux 
of  the  whole  trust  problem,  is:  Arc  trusts  monopolies?  Do 
trusts  have  this  exclusive  power  of  sale  over  products?  Can 
they  arbitrarily  fix  prices?  If  so,  that  ])ower  must  be  over- 
ruled. There  are  many  who  insi-t  that  trusts  arc  nothing 
but  great  industrial  organizations,  differing  from  e;irlier 
organizations  only  in  being  larger.  These  men,  anumg 
them  Geo.  Gunton,  argue  that  trusts  do  not  aljolish  com- 
petition but  intensify  it.  They  assert  that  combination 
has  not  in  the  past  destroyed  competition;  that  it  has 
seemed  to  do  so,  but,  that,  in  fact,  each  death  of  competi- 
tion has  witnessed  a  revival  of  stronger  and  more  keen  com- 
petition. They  point  to  the  cotton  industry  as  an  example. 
At  one  time  all  cloth  was  woven  ])y  hand-loom.  Power- 
looms  were  invented;  they  could  be  used  profitably  only  in 
factories  where  the  specialization  and  division  of  labor 
could  be  secured  to  a  greater  extent.  They  necessitated 
greater  comlhnation  of  capital.  They  manufactured  more 
cheaply  and  they  drove  out  the  workers  of  the  hand-looms; 
but  there  soon  sprang  up  competing  ])Ower-loom  factories 
whose  com])etition  was  more  widespread  and  more  keen 
than  those  of  hand-loom  weavers.  Small  factories  under 
individual  owners  were  succeeded  by  lai'ger  factories  under 
corporate  control,  'j'he  more  it  was  ])ossil)le  to  c-entralize 
and  condiine,  tlie  greater  were  the  centralization  and  coni- 
bination;  but  the  fewer  tlu^  com])etiiors.  the  more  fierce 
was  the  C(n]ipetition  and  the  lower  was  the  })rice  of  the 
nuinufactured  ai'tiele.  All  indusiries  sliow  larger  and 
larger,  but  relatively  fewer  i\nt\  fewer  concerns.  It  will 
ho  conceded  by  nearly  all  tliat  the  fewer  and  tlie  larger 
the  competitors,  tlu'  keener  the  eompelition.  It  is  a  battle 
between  giants.     '"  J^ut,"'   say   the  inillions  who  are  now 


loo  The  Trusts 

studyinn:  trusts,  '•  is  not  the  battle  of  the  giants  for  su- 
preinaey?  Is  it  not  in  every  case  a  figlit  to  tlie  finish? 
When  tlie  war  of  competition  is  over,  is  not  one  of  the 
competitors  eitlier  killed  or  subdued?  Is  he  not  destroyed 
or  annexed?  In  any  case  is  there  not  one  less?  And  are 
not  things  tending  inevitably  and  rapidly  to  a  condition 
■when,  in  every  industry,  there  will  be  either  only  one  es- 
tablishment, or  else  one  establishment  so  great  that  it  will 
dominate  the  whole  industry  and  have  a  practical  monop- 
oly?" 

We  have  already  clearly  shown  that  under  the  com- 
2)etitive  system  the  demand  for  cheaper  production  tends 
to  make  the  cheapest  the  biggest,  and  tends  ruth- 
lessly to  destroy  the  enterprises  that  are  not  the  cheapest. 
The  ultimate  survival  of  none  but  the  cheapest  is  the 
irresistible  movement  of  competition.  Monopoly  is  thus 
the  goal  of  competition;  or  as  ^Iv.  Henry  D.  Lloyd,  the 
author  of  Wcdllh  Ai/ainst  ('(niimoniveaJth,  has  so  sen- 
tentiously  expressed  it:  ''  Mowipahj  is  husiiicss  at  the  end 
of  its  jnurnci/.''  The  peculiarity  of  a  trust  is  its  attempt 
to  consolidate  all  competitors.  This,  indeed,  seems  most 
clearly  to  distinguish  trusts  from  all  other  large  concentra- 
tions of  ca])ital.  There  appears,  indeed,  to  be  a  diiference 
in  character  rather  than  in  size,  viz.:  that  trtists  are  not 
merely  great  enterprises  for  the  purpose  of  securing 
economical  and  chea]>  jiroduction  and  distrilmtion,  but 
'■  ()(-to[)i  ■'  iliat  ('ndea\()r  to  reach  out  and  gather  in  all 
industries  in  order  to  kill  alt  com])etition  and  to  control 
all  the  iinaiisiM'  [)!'oducnon  in  those  industries,a!id  to  obtain 
/;///  p(),->c>-i(.n.  when  po^^-iblc,  of  alt  the  sources  of  raw 
materials  ;ind  all  the  chea]i  means  of  distribution.  It  is 
this  att('rii[)t-  at  ni'mopolv.  and  the  a])parent  success  of  the 
movement,  thai  liiakes  liu-  v.'orld  to-day  ap])rehensive.  It 
i:-  not  to  ]ji-  womlLTcd  that  the  people  tremble  in  the  pres- 


What  is  Monopoly  ?  loi 

cncc  of  the  power  of  trusts.     It  docs  appear,  often,  as  if 

they  had  a  Jii()ii()[)()!\',  as  if  we  were  utterly  at  their 
inerey,  as  if  they  eould  iiiiduly  raisa  cr  depress  prices  and 
unduly  limit  })rodueti()ii  and  <;iv''  us  .ui}  '[>icV^y  (,l  product 
they  choose.  J5ei'ore  ruuuiiiL;  Icoia  iliis  overshadowing 
phantom  let  us  see  to  what  extent  any  trust  yet  formed 
has  acquired  sole  power  or  full  control. 

In  Chapter  I,  concern ini;-  the  si/.e  of  trusts,  we  have 
mcnticincd  the  extent  of  tlic  (-ontrol  of  various  trusts  over 
certain  fields  of  industry.  Tlie  most  striking  fact  is  that, 
with  few  exceptions,  each  trust  controls  the  large  majority 
of  the  plants  in  its  industry;  Init  it  is  somewhat  significant 
that  no  trust  has  for  any  length  of  time  had  full  control 
of  any  held  of  industry.  The  American  Sugar  Kellning 
('om])any.  hetter  known  as  tlic  Sngar  Trust,  many  years 
ago,  was  said  to  control  ninety-eight  per  cent  of  the  sugar 
trade,  a  proportion  of  it  that  was  certainly  suiiicient  to 
dominate  the  entii'e  business  and  to  enable  it  absolutely  to 
control  ])roduction  and  arbitrarily  to  fix  prices,  if  any  trust 
has  such  power.  In  18!)8,  two  great  refineries,  one  belong- 
ing to  tlie  Dosehers  and  the  othei'  to  Arbuckle  IJrotliers, 
went  into  o))eration  and  the  competition  has  certainly 
been  keen  enough  since  that  time.  The  Standard  Oil 
C(un])any  is  ])0]uilai'ly  supposed  to  lia\"e.  or  to  liave  had, 
a  complete  monopoly  of  ih.e  refining  (^f  petrolcTim.  but  it 
is  -tated  on  good  authority  that  there  nre  to-ilay  at  least 
one  hundred  refineries  nof  under  the  conti'ol  of  tlie  Stand- 
ard Oil  ('onii)any.  Attention  has  \)vvu  called  in  Chapter 
i  to  the  gigantic  eon.-olidat  iun-  or  trusts  in  the  steel  busi- 
ness, but  it  is  >igni [leant  that  tliere  ai'C  at  le.ist  three  of 
them  of  enorninu>  eapitalizat  ion.  The  several  toljacco 
trusts  mentioned  in  Chajitei'  1  are.  in  reality,  only  bra.nch.es 
of  one  trust;  l)ut  this  month  (.'ur.i'.  IDOO)  l)ids  fair  to  see 
the  launching  of  a  ju'ojeeteil  er.niipany.  capitalized  at  $3U,- 


I02  The  Trusts 

000,000,  which  will  be  a  lona  fide  and  powerful  competi- 
tor. .    ,   .  :   .  .'    ■ 

Monopoly,  the  sole  power  _to  sell,  is  the  power  to  fix 
prices.  Lee  i}\q  sole  pou'ex.to  sell  be  permanent,  let  the 
thing  over  which  the  power  exists  be  a  necessity,  and  it  is 
as  certain  that  a  price  greatly  in  excess  of  the  cost  of  pro- 
duction will  be  charged  as  it  is  that  human  nature  is  selfish 
and  that  in  making  an  exchange  each  person  will  get  all 
that  he  lawfully  can.  If  the  monopoly  be  not  permanent, 
if  the  article  aft'ected  by  it  be  not  an  absolute  necessity, 
the  tendency  to  charge  an  undue  price  will  vary  in  propor- 
tion to  the  ability  of  the  consumer  to  wait  till  the  time 
when  others  can  produce  and  sell  the  article,  to  the  ability 
of  competition  to  spring  tip  quickly,  and  to  the  possibility 
of  procuring  some  article  as  a  substitute.  If  trusts  are 
monopolies  they  are  absolutely  certain  to  raise  prices.  Let 
us,  therefore,  consider  the  power  of  trusts  over  prices,  for 
our  investigations  in  that  subject  will  help  us  to  answer 
the  question:  Are  Trusts  Monopolies? 


CHAPTER  VI. 
PRICES    AND    POTENTIAL    COMPETITION. 

If  prices  arc  not  to  be  put  up,  wliat  is  to  keep  them 
down  as  trusts  spring  up  and  continue?  Trusts  are  formed 
to  destroy  competition.  When  active  competition  is  de- 
stroyed,— when  you  have  cut  this  string  on  your  hitherto 
captive  balloon  of  prices,  will  it  not  soar  higher  and 
higher? 

Trusts  are  not,  never  have  been  and  never  can  become 
complete,  permanent,  absolute  and  oppressive  monop- 
olies. They  cannot  for  any  great  length  of  time  chiirge 
exorbitant  prices.  lUit  what  is  the  force  that  will  tend  to 
keep  trust  prices  from  becoming  unduly  high?  What  is 
to  save  us  from  the  dangers  of  extortion  by  trusts?  Is 
it  the  mercy  of  capitalists?  Is  it  possible  that  sympathetic 
motives  cause  their  bosoms  to  heave  and  swell  like  the 
ocean?  Xot  at  all.  The  trust  owners  are  the  heads  of  busi- 
ness concerns.  They  arc  engaged  in  them  not  as  philan- 
thropists, or  as  managers  of  charitable  aid  societies.  They 
may  lie  i)hilaiUlir()]ne  and  charitable,  but  they  believe  these 
things  should  be  divorced  from  business.  John  D.  Rocke- 
feller has  given  millions  to  the  cause  of  education,  but, 
])r()bably  he  would  ]iot  make  any  claim  that  the  Standard 
Oil  Company  was  run  for  the  good  it  could  do,  and  prob- 
ably he  would  not  consider  it  a  bright  idea  to  try  so  to 
run  it.     The  trust  problem  would  (juickly  settle  itself  if 

business  motives  did  not  nrevail.    Trusts  would  soon  s:o  to 

^  o 

103 


I04  The  Trusts 

the  region  of  faded  hopes.  No,  the  relief  of  the  people 
from  extortion  by  trusts  and  from  excessive  prices,  will 
not  come  from  the  unselfishness  of  trust  directors,  but  if 
it  comes  at  all,  it  will  come  either  from  their  selfishness, 
or  from  the  people  rising  in  their  might  and  asserting  their 
power.  It  will  not  be  because  the  hearts  of  trust  magnates 
are  bleeding  for  the  people,  but  because  they  fear  that, 
financially,  they  will  be  bled  if  they  attempt  to  charge 
an  unduly  high  price.  Self-interest  is  a  corrective  and 
a  remedial  agency  for  monopoly.  Self-interest  seeks  the 
greatest  profit;  but  the  greatest  aggregate  profit  is  not  ob- 
tained by  asking  the  highest  price,  nor  even  generally  by 
asking  a  high  price.  A  significant  drop  in  the  price  of 
one  trust  jiroduct  has  recently  occurred.  Much  has  been 
said  about  the  increase  in  prices  of  the  products  of  the 
American  Steel  and  Wire  Co.,  such  as  wire  nails,  etc.  In 
the  month  of  April  of  tliis  year,  prices  on  those  goods  were 
reduced  between  $18  and  $23  per  ton  or  about  $1  per  keg 
on  nails,  a  cut  of  from  25  to  33  per  cent.  The  cause  was 
said  to  be  over-production.  In  other  words,  at  the  high 
price  tlie  trust  was  unable  to  sell  all  its  products.  It 
could  make  more  money  at  the  lower  price.  Doubtless 
w(!  lurvo  for  a  time  been  overcharged  by  this  trust,  but 
sucli  extortionate  prices  cannot  Ije  maintained,  and  we 
sincerely  believe  that  a  few  ox])eriences  of  this  kind  will 
teacli  even  trust  magnates  in  general  that  low  prices  mean 
large  aggregate  profits. 

Jligli  prices  do  not  pay  because  they  breed  competition. 
A  trust  may  liave  succeeded  in  acquiring  control  of  an 
industry,  in  abolisliing  or  destroying  its  competitors,  in 
liaving  a  y)raclical  monopoly,  that  is,  in  liaving  all  the 
trade,  all  the  factories,  and  all  the  men  experienced  in  the 
manufacture.  Yet  it  cannot  raise  its  prices  very  much 
without  giving  lirth  to  new  competition,  losing  a  part. 


Prices  and  Potential  Competition         105 

if  not  all,  of  its  trade,  and  rendering  its  factories  and 
])usiness  less  valuable.  There  is  at  least  one  thing  in  which 
there  is  no  monopoly,  and  that  is  trusts  themselves.  x\ny 
set  of  capitalists  can  form  them;  and  there  is  capital  in 
abundance, — idle  ca])ital  in  abundance.  Tlie  lessening  rate 
of  interest  proves  this.  One  of  tlie  great  questions  of  the 
present  day  that  is  forcing  itself  upon  the  minds  of  civil- 
ized people,  is  where  o])enings  are  to  be  found  for  the 
profitable  investment  of  saved  np  wealth,  that  is,  of  pro- 
ductive capital.  For  over  twenty  years  there  has  been  a 
diminishing  return  upon  all  classes  of  investments,  and  the 
prices  of  ilrst-class  securities  have  been  constantly  getting 
higher.  The  interest  rate  has  been  lowered;  government 
bonds  that  yield  but  two  or  three  per  cent  sell  above  par; 
loans  upon  bonds  and  mortgages  of  sufTicient  security  can 
be  obtained  with  ease  at  four  per  cent;  banks  are  troubled 
wilh  a  ])leth()ra  of  money. 

Capital  is  always  on  the  lookout  for  investments.     It  is 
the  most  intrusive  thing  in  tlio  world.      It  is  the  most 
mobile.  It  is  a  thing  without  a  country.   It  is  not  bothered 
much  by  distance  or  frontiers.     It  is  international.     The 
"  Great  West  ''  of  our  own  country  was  built  up  largely  by 
England's  capital;   so  was  Australia.     The  Boer  war  is  the 
result  of  English  development  of  South  Africa.      United 
States  financiers  have  lately  loaned  $-2r),000,000  to  Eussia. 
All  the  nations  of  l'hiro])e  have  acciuired  spheres  of  influ- 
ence in  China  and  colonies  in  Africa,  into  which  their 
capital  will   flow.     I^ninvested   capital  seeks  investment. 
Invested  capital  dreads  competition.     Its  most  elTcctual, 
its  only  pernuiiu'ntly  ell'ectual,  v/ay  of  hindering  competi- 
tion   is    in    keeping    down    tlio    prices    of    its    product. 
There    is    then    a   great    latent    competition, — a   potential 
conipefilinn, — a     competition     which     is     sure     to     spring 
up    if    prices    become    extortionate.       Trusts    Jiave    not 


io6  The  Trusts 

stifled  competition;  they  may  stop  it  among  the  per- 
sons who  form  the  trusts;  they  may,  indeed,  gather 
into  one  union  all  the  productive  agencies  of  a  certain 
industry  exi,^ting  at  one  time,  but  they  cannot  monopolize 
the  vast  capital  of  the  world  or  the  people's  irrepressible 
and  illimitable  energ}'. 

Existing  trusts  have  been  greatly  affected  by  this  poten- 
tial competition.  At  the  annual  meeting  of  the  Glucose 
Sugar  Refining  Compan}',  which  was  organized  in  xVugust, 
1897,  and  which  is  capitalized  for  about  $37,000,000,  and 
which  controls  nearly  all  the  glucose  sugar  refineries  of  the 
country,  its  president  said: 

"  There  is  not  at  this  time  a  bushel  of  corn  being  ground  by 
any  concern  except  those  of  our  company.  We  do  not  intend  to 
pursue  the  policy  of  making  spectacular  profits  in  the  beginning, 
and  dwindling  at  the  end.  We  are  in  business  for  a  long  pull. 
For  instance,  on  a  ten-year  run  we  might  have  raised  prices, 
made  $5,000,000  the  first  year,  $2,500,000  the  next,  $1,000,000  the 
next,  and  down  to  notliing  at  the  end  of  ten  years.  It  is  better 
business  to  be  moderate  and  earn  $2,000,000  a  year  for  ten  years, 
which  would  be  $20,000,000  in  profit,  against  the  loss  of  $10,000,000 
the  other  way.  We  did  for  a  short  time  make  the  mistake  in  the 
beginning  of  putting  the  price  too  high,  but  it  did  not  last  long. 
If  we  had  maintained  that  policy,  we  would  have  sixteen  or  seven- 
teen competitors  against  one  as  it  is  now." 

Ex-Speaker  Eeed,  in  a  recent  article  on  monopolies, 
among  other  things,  said: 

"  A  good  many  years  ago  a  wise  old  manager  in  my  district 
told  me  the  secret  of  success.  I  said  to  him :  *  You  are  the  only 
man  who  makes  these  things.  You  can  demand  your  own  price.' 
Said  ho,  '  1  am  trying  every  minute  to  make  these  goods  chcaj)cr 
and  sell  them  clicapcr.'  'Why  so?'  '1  am  the  only  man,'  he  re- 
plied, '  in  tliis  l)usiness  and  I  want  to  stay  so.  If  I  raise  the  price, 
I  would  liavo  a  boom,  hut  I  would  lose  a  business.  In  the  long 
run  Ijusiness  is  belter  than  boom.'" 

Tlie  Standard  Oil  Company  may  be  cited  as  the  typical 
trust.    It  is  the  oldest  and  possibly  the  most  pov/erful.    It 


Prices  and  Potential  Competition         107 

has  had  some,  }mt  relatively  little,  competition.  IIow  has 
potential  eompetition  aU'eeted  it?  What  has  been,  the 
tendency  of  the  prices  of  the  Standard  Oil  Company?  The 
following  table  shows  the  price  of  the  crude  oil  at  the 
■\vclls,  and  of  the  refined  in  Xew  York  for  export,  also  the 
difference  between  the  crude  and  the  refined,  that  is,  tlic 
cost  for  refining  for  each  year  from  18T0  to  l-SiiT: 

AVKKAGE    ANNUAL     PRICE     PER     GALLOX    IX    CENTS     OF     REFIXED 
AND    CRUDE   PETROLEUM. 

Ypar  Crude  at  Refine<l  in  Difference 

^^^^-  Wells.  New  York.  ui.rerence. 

1870 9.19  20.35  17.16 

1871 10.52  24.24  13.72 

1872 9.43  23.59  14.16 

1873 4.12  17.87  13.75 

1874 2.81  12.98  10.17 

1S75 2.96  13.00  10.04 

1870 5.99  19.10  13.17 

1877 5.CS  15.44  9.70 

1878 2.76  10.76  8.00 

1879 2.04  8.08  0.04 

1880 2.24  9.05  G.81 

1881 2.30  8.01  5.98 

1882 1.87  7.39  5.52 

1883 2.52  8.02  5.50 

1884 1.99  8.15  0.16 

1885 2.11  7.93  5.82 

1880 1.09  7.07  5.38 

1887 1.59  0.72  5.13 

18f^S 2.0S  7.49  5.41 

1889 2.24  7.11  4.87 

18r,0 2.06  7.30  5.24 

1891 1.07  0.85  5.18 

1892 1.32  0.07  4.75 

1893 1.52  5.24  3.72 

1894 1.99  5.19  3.20 

1895 3.22  7.30  4.14 

1890 2.83  0.98  4.15 

1S97 1.87  5.91  4.04 


io8  The  Trusts 

In  studying  these  figures,  certain  facts  should  constantly 
he   home  in  mind.    In   1870   and   1871,  the   quality   of 
the  oil  was  poor;  its  production  was  in  the  hands  of  a  largo 
numher  of  independent  rivals,  and  the  refining  of  oil  was 
not  a  profitahle  business.     The  first  alliance  between  the 
Standard  Oil  Companies  of  Ohio  and  Pennsylvania  and  the 
Pralt  Co.  and  the  Atlantic  Eefining  Co.  was  in  1871  or 
1872.    This  alliance  may  be  considered  the  nucleus  of  the 
trust.     For  several  years  after  the  alliance  was  formed 
there  was  strong  competition,  although  it  can  hardly  be 
questioned  that  the   Standard   Oil   Companies  and  their 
allies  had  the  advantage  of  railroad  discrimination  in  their 
favor  and  of  special  privileges.      The  date  of  the  formal 
organization  of  the  Standard  Oil  Trust  is  1882;    but  the 
control  of  the  trade  had  undoubtedly  been  secured  prior 
to  that  time.     The  subsequent  incorporation  was  but  a 
change  in  name.     An  examination  of  the  figures  for  this 
period  from  1871  down  to  1897,  shows:  first,  a  decline  in 
the    price    of   the    crude;     second,    a   greater   decline    (in 
amount)  in  the  diU'erenco  between  the  price  of  the  crude 
and  the  refined;   tliat  is,  llie  charge  made  for  refining  and 
transportation  has  decreased.     The  decline  was  generally 
uniform  and  progressive  from  1870  down  to  1883,  the  date 
of  the  formal  organization  of  the  trust.     That  year  the 
price  of  the  crude  was  1.87,  the  price  of  the  refined,  7.39, 
the  difference,  or  charge  made  for  refining  and  transport- 
ing, 5. .52.     In  1897,  the  price  of  the  crude  is  again  1.87, 
but  tlio  price  of  the  refmed  has  gone  down  to  5.91,  the 
dilTcrcnoc;  between  the  cost  of  tlie  crude  and  the  refined, 
that  is, 1 1)0  cliarge  made  for  refining  and  transporting,  being 
4.01.      With  the  exception  of  two  years,  1893  and  1894, 
tlio  ))rico  of  tho  refined  was  never  so  low  as  in  ]897.     The 
price  of  tlic  crude  was  relatively  low  in  the  years  1893  and 
1891.     The  difrcrencc  between  the  cost  of  the  crude  and 


Prices  and  Potential  Competition         109 

the  refined,  that  is,  tlic  cost  of  refining  and  transporting, 
■\vas  never  so  little  as  in  1S'J7,  except  in  the  years  1893  and 
l.S!M.  Of  course,  tliere  liave  been  enormous  savings  in  tlie 
cost  of  transportation,  and  wonderful  inventions  and  im- 
})rovenients  in  the  processes  of  refining,  wliich  must  have 
made  the  cost  to  tlie  trust  much  less;  but  one  is  forced 
to  the  conclusion  tliat,  all  in  all,  coupled  with  a  wonderful 
improvement  in  quality,  the  Standard  Oil  Trust  has  not 
only  cheapened  the  cost  of  oil,  hut  has  lowered  the  price 
charged  for  rehning  and  transporting.  George  Gunton's 
deductions  from  his  figures,  which  are  suhstantially  the 
same  as  those  given  ahove,  are  as  follows: 

"  Tlie  petroleiini  industry  began  in  1S59.  From  tlien  until  about 
].S7l  ilhnTii!uitin(,'  oil  was  produt-ed  by  a  large  nunilier  of  con- 
cerns. The  oil  was  very  poor  and  dangerous  to  use.  From  18()3 
inclusive,  when  oil  j  roduction  was  becoming  an  establislied  busi- 
ness and  full  st^itistics  were  available,  until  1871,  the  price  in 
gold  fell  from  30.7  to  21.7  per  gallon,  or  29Yio  per  cent.  From 
1S71  to  18S0,  under  the  Standard  Oil  Company,  the  price  fell  from 
21.7  to  9.125,  or  r)8  per  cent;  and  from  18S0  to  1S9S  (the  price  in 
1898  being  5.7),  during  which  period  the  industry  lias  been  under 
tlu!  control  of  tlu^  Tiust,  the  price  has  fallen  from  9.125  to  5.7,  or 
'^~''/ii>  V^^'  cent.  The  production  of  oil  has  increased  from  9500  bar- 
rels in  1859  to  35,l(i5,990  barrels  in  1897." 

''J'he  annual  consumption  of  oil  is  ahout  a  hillion  gallons, 
and  a  saving  ol  two  cents  on  the  gallon,  which  is  about 
the  decrease  in  i)rice  Ijctwcen  1883  and  18!)8,  the  era  of 
the  formal  Trust,  would  l)e  $-30,0()0,0(K)  for  the  year  1898 
alone.  If  we  C()m[)are  tluit  year  with  the  year  18T1,  when 
the  alliance  was  made  Ijetween  the  J'ratt  Go.  and  the  At- 
lantic lieflning  Go.  and  the  Standard  Oil  Gompanies  of 
Ohio  and  l*enn>ylvania,  we  find  a  reduction  of  sixteen  cents 
in  the  price,  which  would  maku  a  saving  or  difference 
of  .$lGO,OUO,()tH)  on  the  out])ut  and  product  for  the  year 
iSiiS  alone.     Whether,  indeed,  even  at  these  prices,  the 


I  lo  The  Trusts 

Standard  Oil  Co.  is  not  receiving  an  undue  profit  and 
charging  an  undue  price,  may  be  a  question;  but  it  is  rather 
a  difference  of  opinion  as  to  what  constitutes  a  fair  profit 
than  it  is  a  question  of  fact.  If  in  explanation  it  be  said, 
on  the  other  hand,  that  the  Standard  Oil  Company  has 
some  active  competition,  then  we  are  forced  to  tlie  conclu- 
sion that,  if  this  great  gigantic  industry  cannot  become 
a  monopoly,  no  other  industrial  trust  can.  If  the  feeble 
active  competition  which  the  Standard  Oil  Trust  has  had, 
is  not  the  cause  of  lowered  prices,  then  we  must  ascribe 
it  to  that  great  latent  potential  competition, — that  fear  of 
active  competition,  which  keeps  prices  witliin  the  limits 
of  reasonable  profits,  just  as  the  fear  of  death  deters  the 
would-be  murderer  from  carrying  out  his  villainous  de- 
signs. 

However  powerful  trusts  may  be,  if  they  raise  prices 
beyond  the  point  of  fair  profits,  sooner  or  later  (and  the 
higher  tlie  prices,  the  sooner)  they  will  meet  with  competi- 
tion. Weak  competitors  may  go  down  before  them,  but 
there  is  one  thing  at  least  which  trusts  cannot  monopolize, 
and  that  is  trusts  themselves.  Others  can  obtain  the  capi- 
tal, if  there  is  a  fair  measure  of  profit  in  its  investment, 
and  can  form  a  rival  trust.  AVhy  is  it  that  that  gigantic 
trust,  the  American  Sugar  Company,  with  its  capitaliza- 
tion of  nearly  $75,000,000,  has  had  such  strong  competi- 
tion with  the  Arbuckles  and  the  Doschers?  That  competi- 
tion certainly  would  not  have  arisen  had  there  not  been 
a  belief  that  in  the  business  there  was  an  enormous  profit. 
]t  pro])ably  would  never  have  come  into  being  had  not  the 
Sugar  Company  for  many  years  paid  enormous  dividends 
ui)i)n  its  ])r()fnse]y  watered  stock, — seven  per  cent  ujion 
its  jii'd'crrod  and  twelve  per  cent  upon  its  common.  There 
is,  indeed,  every  j-eason  to  believe  that  the  competition 
was  the  result  of  an  excessive  price  on  the  part  of  the 


Prices  and  Potential  Competition         1 1 1 

Sugar  Trust.  That  eompotition  came  into  being  in  1898. 
The  table  of  prices  for  that  year  sliow  that  the  difference 
between  tlie  prices  of  raw  and  refined  sugar,  that  is,  the 
charge  for  refining  it,  was  .730  of  a  cent  per  pound,  but 
the  year  before  tlie  competition  began  it  was  .946  of  a  cent 
per  pound,  a  difference  of  .21(5  of  a  cent  per  pound.  This 
may  seem  too  ti-i fling  for  consideration  and  an  overcharge 
so  small  as  to  Ije  unn.oticeable, — in  no  sense  an  extortion. 
It  is  true  that  the  burden  imposed  by  it  upon  any  one  indi- 
vidual would  be  so  trilling  as  to  hardly  call  forth  a  com- 
])laint,  but  the  aggregate  amount  on  the  sugar  trade  of  the 
country  would  be  so  great  as  to  tem])t  capital  immediately 
to  invest  in  that  industry  if  it  were  certain  those  prices 
would  be  maintained.  One-tenth  of  a  cent  per  pound  on 
the  sugar  consumed  in  tlie  United  States  would  mean 
almost  $3,500,000  per  annum,  and  .216  of  a  cent  would 
mean  practically  $T,000,000  per  year.  If  the  Sugar 
'J'rust  were  charging  this  small  sum  in  excess  of  a  fair 
profit,  would  it  not  call  forth  competition,  and  is  it  not 
proper  to  infer  that  that  was  at  least  one  of  the  reasons 
that  did  call  forth  the  competition  it  has  met  with?  It 
shoald  be  noticed  that  in  the  year  1896,  with  raw  sugar 
higher  in  price  than  in  1897,  the  difference  between  the 
cost  of  the  raw  and  the  selling  price  of  the  refined  was 
.908  of  a  cent  per  pound:  in  189-"),  it  was  .882  of  a  cent, 
and  in  1891,  .880  of  a  cent, — the  raw  in  the  la^t  two  years 
being,  however,  at  a  lower  price.  In  other  words,  for  sev- 
eral years  prior  to  the  Arbuckle  and  Doseher  com])etition, 
the  charge  for  refining  had  steadily  increased, — and  com- 
])(^iition  resulted. 

"We  have  seen  that  tlie  cheapest  producer  naturally  be- 
comes the  biggest  producer  if  j'rn^  oivJ  fair  frade  exists. 
Theoref icnlly.  ihe  clicaiiest  sellci-  is  bcunid  ultimately  to 
Ijecome   the   sole   seller, — a    ni'iiiMpolist.      If   Sjiecial   priv- 


1 1 2  The  Trusts 

ilexes  are  refused  and  fair  competition  is  compelled,  mon- 
o])oly  can  be  acquired  onl}'  by  the  lowering  of  prices.  Un- 
der such  conditions  of  no  special  privileges,  what  are  the 
means  of  the  continuance  of  the  monopoly  of  the  cheap- 
est, and  how  long  will  it  continue?  Bourke  Cochran,  in  a 
memorable  address  on  trusts,  has  answered  this  question 
substantially  as  follows:  "  Only  so  long  as  it  continues  to 
produce  and  to  sell  most  cheaply,  and  so  long  as  it  does,  it  is 
a  blessing  to  the  consumer  and  a  stimulus  to  industry." 
The  eloquent  orator  was  most  careful  to  point  out  and  make 
clear  iliat  this  was  true  only  where  competition  was  free 
and  Wiiere  no  competitor  had  special  privileges.  If  to  this 
he  had  added  thai  to  ensure  this  ^'mitation  to  monopoly, 
it  was  necessary  not  only  that  competition  should  be  free, 
but  that  it  should  be  fair, — that  tlie  powerful  and  highly 
capitalized  should  not  sell  their  goods  for  less  than  cost 
in  one  or  even  in  all  localities  in  order  merely  to  undersell 
his  weaker  competitor,  knowing  that  the  competition  would 
soon  work  the  ruin  of  his  rival  while  he,  the  powerful  com- 
petitor, could  stand  it  either  because  of  his  ability  to  make 
a  profit  on  sales  in  some  locality  where  this  ruinous  price 
was  not  charged,  or  because  of  his  greater  capital  enabling 
him  to  stand  the  loss  longer, — if  this  had  been  added  to 
the  other  pn/visofi  of  Bourke  Cochran,  it  would  undoubt- 
edly be  true  that  a  monopoly  not  based  on  or  propped  up  by 
special  privileges  can  be  ])ermanently  maintained  only  in 
ease  it  is  economically  superior,  that  is,  in  case  it  produces 
and  sells  at  the  cheapest  rate. 

Tlie  experience  of  the  last  ton  years  with  trusts,  as  they 
actually  exist,  amply  and  conclusively  proves  this.  Under 
present  conditions,  if  combinations  are  to  continue  and  to 
meet  witJi  success,  it  must  be  by  better  and  cheaper  service 
to  tlie  conmnniity.  Competition  can  be  permanently 
st()])])ed  only  by  coniinuously  selling  or  serving  at  a  rate 


i^rices  and  l^oLciuial  Conii)eLltion  113 

or  price  lower  tliaii  otlu'r?  ran  ad'onl  to  sell.  Even  special 
])riYileges  and  i'avt»rs  only  delay  the  time  when  competition 
shall  assert  itself,  J'or  the  people  will  rise  and  sweep  away 
the  privile<,'-es  as  soon  as  ihey  realize  their  existence.  If 
any  trust,  for  any  appreeialjle  leni,4h  of  time,  exacts  an  un- 
due or  even  a  liberal  ])roht,  new  capital  will  be  invested  in 
that  industi'y,another  trust  will  be  formed,and  competition 
will  operate  with  a  i^'reater  iii tensity  than  was  possible 
on  a  smaller  scale.  The  trusts  that  have  continued  for  any 
length  of  time  are  those  which  have  conducted  their  busi- 
ness on  the  theory  of  moderate  margins  of  profit,  relying 
upon  a  large  output  produced  chea|)ly  as  a  result  of  all  the 
savings  that  can  be  obtained  by  the  use  of  large  capital 
intelligently  admin istej'cd,  and  knowing  that  in  this  way 
they  could  oljtain  a  greater  aggregate  profit.  The  only 
trusts  that  have  succeeded  or  that  can  succeed  are  those 
thus  managed.  The  failure  of  innumerable  trusts,  '^'cor- 
ners,'' and  '^  combines"  conclusively  proves  this. 

It  will  ]je  insisted  that  the  prices  of  nearly  everything 
controlled  by  tru>ts  have  advanced,  in  recent  years,  to  a 
large  extent;  that  sugar  and  oil,  at  tlie  most,  are  only  ex- 
ce])tioiis,  and  doubtful  ones  at  that.  Byron  \V.  Holt  of 
the  New  England  Ereo  Trade  League,  has  said: 

"Out  of  four  hundred  trusts  whicli  T  liavo  onuineratod,  I  do  not 
believe  tliat  ten  ha\'e  lowered  prices.  In  fact.  I  know  of  none, 
c.\"cej)t  one  or  two,  and  tliese  have  depreciated  tlie  (juality  of  their 
product.  In  one  such  case  the  prices  are  hchl  so  lii;^li  that  there 
are  heavy  iiiijxirts  of  coinj)etini^  floods,  alt!iou<^'li  tluTO  is  a  duty 
on  them  of  nearly  TOO  jier  cent.  In  nine  cases  o\it  of  ten  trusts 
liave  raised  j)rices — often  more  than  .11)  ])er  cent.  That  mui-h  of  the 
pnsDit  /■(•sc  ill  prii-i's  is  due  to  ijcncrdi  cconoinic  foiiditioiis  is 
l,r(>h(ihlj/  tnir.  On  the  other  liand.  it  is  just  as  true  tluit,  had 
there  been  no  taritf  duties,  the  rise  in  prices  would  neither  have 
been  so  i^'encral  nor  m>  ,^i'eat." 

The  wisdom  or  follv  of  the  free  trade  suu-^-estion  will 


1 14  The  Trusts 

be  considered  later.  At  present  the  fact  of  importance  is 
the  increase  of  prices,  and  also  the  admission,  contained  in 
the  words  that  are  italicized. 

In  considering  the  recent  increase  in  prices,  one  should 
not  overlook  the  admission  made  hy  Mr.  Holt, — "that  much 
of  the  present  rise  in  prices  is  due  to  general  economic  con- 
ditions is  probably  true."  The  prices  of  sugar  and  oil  are 
those  entitled  to  the  greatest  consideration  because  extend- 
ing over  a  longer  period  of  trust  control.  We  should  be 
very  cautious  in  making  general  deductions  from  the  prices 
of  other  products  which  have  within  the  past  six  or  seven 
years  come  under  trust  control,  because  tlie  majority  of 
our  trusts,  as  was  seen  in  Cliapter  I,  have  been  formed  since 
the  great  financial  panic  of  1893.  They  have  been  the 
accompaniment  of  the  revival  of  industry  since  that  time. 
The  panic  of  1893  witnessed  a  complete  collapse 
of  prices.  It  was  absolutely  impossible  to  obtain  for  any- 
thing its  reasonable  value  as  measured  by  cost  of  produc- 
tion. This  fact,  although  of  almost  universal  knowledge, 
is  lost  sight  of  by  the  majority  of  people  in  considering  the 
prices  of  articles  produced  by  trusts.  The  prices  of  most 
articles  made  by  trusts  have  advanced  enormously  since 
1893,  but  it  is  absolutely  unfair  and  incorrect  to  at- 
tribute the  advance  to  industrial  combination.  The  rise 
of  prices  is  chiefly  the  result  of  the  universal  demand,  and 
it  lias  been  as  great,  if  not  greater,  in  lines  where  no  com- 
binations existed.  For  example,  it  is  said  that  up  to  a 
year  ago  ])ig  tin  had  advanced  seventy-five  per  conl;  steel 
rails,  ninety-four  per  cent;  steel  ])lates,  one  hundred  and 
twenty-seven  per  cent;  refined  bar  iron, eighty-two  per  cent; 
and  yet  at  that  tiuK!  there  were  no  trusts  in  these  industries. 
Tbere  arc,  ])L'rhnps,  some  products  the  prices  of  wliich  have 
])ceii  unduly  raised  and  maintained,  but  in  these  cases,  if 
any  exist,  it  is  believed  that  uj^on  investigation  it  will  be 


Prices  and  l^otcntial  Competition         115 

found  that  the  trusts  liavo  hoen  able  to  obtain  these  prices 
Ijy  reason  of  special  privileges,  sucli  as  prohibitive  rather 
than  protective  tarilfs,  or  by  reasoTT  of  possessing  patents 
upon  lal)or-s;n;iig  machines,  or  by  \::-tue  of  unjust  dis- 
crinii.uations  in  their  favor  by  railways  and  other  agencies 
of  trans] )ortat ion,  or  by  detaining  the  ownership  of  natural 
monopolies.     The  important  point  for  us  to  consider,  at 
this  stage  of  our  study  of  the  question,  is  that  there  is  no 
]n-oof  that  the  mere  aggregation  of  capital  into  gigantic 
trusts  or  cond)inations  has  resulted  permanenilij  in    prices 
that  are  higher  than  would  be  properly  occasioned  by  the 
increased  demand  consequent  upon  the  revival  of  industry. 
If  this  point  can  be  established,  it  is  of  great  importance, 
bt'cause  the  evils  of  trusts,  so  far  as  prices  are  concerned, 
will  then  be  sliown  to  be  either  merely  temporary,  or  else 
not  inherent  in  trusts  themselves  but  the  result  of  special 
])riveleges  and  oi'  the  ])ractice  of  unfair  methods  of  coin- 
])etition;   and  tlie  remedy  for  these  evils,  which  will  natu- 
rally suggest  itself  as  being  perfectly  efficient  and  wholly 
sufficient,  will  be  the  abolition  of  all  s})ecial  privileges  and 
the  prohilntion  of  unfair  methods.    It  is  not  inappropriate 
here  to  make  brief  mention  of  the  prices  of  tin  plate.     Tin 
]date  promises  to  be  an  issue  in  the  campaign  against  trusts 
as  imjiortant  as  it  has  1)cen  in  the  campaign  for  a  protec- 
tive tarilf.    Tlie  American  Tin  Plate  Company  wdll  be  cited 
as  tlie  tyiiieal  trust,  and  much  will  be  said  of  its  extortions 
and  of  its  mono])olistic  ])owers.      The  im]n*ession  has  been 
general  that  this  tin  plate  trust  das  unduly  advanced  the 
prices  of  its  jU'iMlucts  and  has  extorted  large  sums  of  money 
from  tlie  Anjeriean  ])ublic,  l)y  whose  lil)eral  policy  it  has 
been  fostered  and  ilevelo|)ed.     In  a  subsequent  chapter,  in 
wliich  the  efi'eet  of  tlie  tarilf  u])on  the  trusts  is  set  forth,  we 
will  give  some  study  to  this  industry  and  its  jiriees.      But 
it  is  sufficient  now  to  say:    first,  that  it  is  by  no  means 


1 1 6  The  Trusts 

certain  that  even  the  tin  plate  trust  has  extortionately  or 
unduly  raised  its  prices;  and,  secondly,  that  assuming  that 
it  has,  its  power  to  do  so  is  due,  perhaps,  in  part,  to  an 
excessive  tarifi;  which  keeps  out  foreign  competitors,  and 
in  part  to  its  having  made  a  contract  with  the  producers 
of  tin  plate  mills  and  machinery  w^hereby  for  a  consider- 
able period  of  time  no  one  else  can  obtain  the  necessary 
machinery  to  conduct  the  enterprise.  If  that  is  true,  it  is 
so  clearly  a  contract  in  restraint  of  trade,  so  manifestly  a 
conspiracy  against  the  public,  so  plain  and  bald  an  attempt 
to  monopolize,  that  it  should  be  punished  as  a  crime,  and 
every  means  should  be  taken  to  prevent  such  a  company 
from  carrying  on  business.  That  kind  of  a  trust  cannot 
be  crushed  too  quickly  or  too  effectually. 

We  have  pointed  out  that  potential  competition  is  one  of 
the    remedies — a    partial    remedy — against    extortionate 
prices.      We  have  shown  how  invested  capital  w'ill  shrink 
from  calling  into  active  competition  the  latent  competi- 
tion of  uninvested  wealth.      It  is  unqualifiedly  true  that 
no  monopoly  that  exacts  high  prices  can  permanently  exist 
against  potential  competition,  provided  there  are  no  special 
privileges  given  to  the  monopoly  and  provided  there  is  fair 
competition,  but  the  great  difficulty  is  that  potential  com- 
petition  cannot   prevent   for  all   the  time   a   considerable 
amount  of  extortion.     The  time  that  is  required  to  enable 
the  potential  competitor  to  establish  a  business  and  becoma 
an  active  competitor  may  be  a  period  of  extortion  by  the 
mono})oly.     Potential  competition  may  tend  to  keep  prices 
down;    but,   although   it  is   doubtless   a  remedy   for  any 
])r()l()nged  and  continued  extortion,  it  is  quite  as  certain 
tliat  it  cannot  ])revent  occasional  higli  prices.      As  men 
often  ignoi-o  or  forgot  wliat  is  their  self-interest,  they  may, 
and,  doubtless,  not  infrequently  do,  raise  prices  consider- 
ably higlier  thun  tliat  which  will  afford  a  fair  profit;  and 


Prices  and  Potential  Competition         117 

it  is  possible  that  in  some  instances  tliey  have  kept  prices 
for  a  loD,!,^  time  slightly  higher  than  the  j)rices  that  repre- 
sent fair  profits,  and  at  times  have  raised  them  ahno.-t  to 
the  point  of  extortion. 

We  cannot  wholly  rely  on  the  self-interest  of  men  to 
keep  them  from  doing  that  which  is  ojiposed  to  their  hest 
interests;  for  seltishness  and  greed  often  overcome  one's 
sense  of  self-interest,  and  selfishness  and  greed  are  short- 
sighted. iSelf-interest  is  opposed  to  intemperance  and  to 
dissipation  and  to  everything  that  is  immoderate;  but  how 
many  men  we  liiul  burning  the  candle  of  life  at  both  ends. 
Xor  can  we  count  on  self-interest  saving  us  from  Inisiness 
follies.  Self-interest  sliould  teach,  every  man  to  treat  his 
horses  gently  and  kindly,  to  care  for  them  and  to  protect 
them;  but  self-interest  so  frecjuently  fails  in  this  that  we 
have  to  liave  societies  for  jirevention  of  cruelty  to  animals. 
Self-interest  should  teach  the  parent  to  l)e  kind  to  his  child 
and  to  educate  aiul  to  train  liim  for  future  usefulness;  but 
we  have  to  have  societies  for  the  jn-evention  of  cruelty  to 
children  and  laws  which  authorize  us  sometimes  to  take  the 
child  away  from  the  parent.  Self-intert'st  should  teach  us, 
as  a  state,  to  hus])and  our  resources;  hut  we  have  seen  our 
timber  lands  denuded  of  their  trees,  and  as  a  result  many  of 
our  streams,  which  were  once  navigable,  are  now  running 
shallow.  That  "  honesty  is  the  best  ])olicy  "  is  an  old  adage; 
but  men  forget  this  maxim  concci-ning  self-interest,  and 
our  prisons  are  lilled  with  thieves  and  Inirglars  and  em- 
bezzlers. Self-interest  is.  indeed,  a  powerful  intluence  in 
affecting  nieirs  conduct,  but  the  weakness  of  it  is  that  too 
often  our  selfishness  makes  us  blind  to  our  real  self-interest, 
rx-eiiuse  of  this,  trii.-ls  have  not  infrequently  been  guilty  of 
tenu)orai'v  exactions,  pending  the  establishment  of  a  coiu- 
iietiiive  industry  which,  because  of  its  nuignitude,  will  take 
a  lonu-  time  to  get  under  wav. 


1 1 8  The  Trusts 

"We  have  recently  had  a  most  striking  example,  according 
to  the  reports  of  our  daily  papers.  In  the  issue  of  tho 
Xew  York  Herald  for  March  20,  1900,  it  is  stated  editori- 
ally that  Congress  is  anxious  to  build  a  number  of  warships, 
but  that  the  price  of  armor  plate  has  been  so  unduly  ad- 
vanced and  is  at  such  an  extortionate  figure  that  many 
of  the  members  of  Congress  are  unwilling  to  pay  the  price 
asked  by  the  monopoly  that  has  control  of  the  industry. 
The  editorial  states  the  alternative  thus:  There  is  only 
one  thing  for  Congress  to  do — pay  the  price  asked,  or  fail 
to  build  the  warships.  It  cannot  obtain  the  armor  else- 
where. If  it  were  to  establish  an  armor  making  plant  of  its 
own,  it  could  not  get  it  running  for  two  years.  ^Ye  7nust  have 
battleships  without  delay,  therefore  we  must  pay  the  price. 

Another  instance  of  the  temporary  monopoly  which  a 
trust  may  have — a  monopoly  which,  while  it  continues, 
may  be  most  merciless — is  the  American  Ice  Co.  This 
company,  having  bought  out  the  Knickerbocker  Ice  Co. 
and  the  Consolidated  Ice  Co.,  that  is,  having  bought 
about  90,000  shares  of  the  stock  of  each  company,  there 
being  but  100,000  shares  in  each,  and  having  made  con- 
tracts with  all  owners  of  artificial  ice  plants  in  the  vicinity 
of  Xew  York  City  to  take  all  their  surplus,  and  having 
obtained  all  the  available  supply  which  could  under  ordi- 
nary circumstances  be  brought  to  the  Xew  York  market, 
and  having  also  o])tained  special  docking  privileges  of  an 
almost  exclusive  character, — proceeded  to  put  up  the  price 
of  ice  far  in  excess  of  any  increase  in  the  cost  of  harvesting 
it,  resulting  from  the  sliort  crop  on  the  Xorth  Eiver.  Tlie 
price  was  raised  one  hundred  per  cent;  that  is,  from  tiiir'y 
to  sixty  cents  per  Imndred.  The  facts  connected  with  this 
transaction  are  of  great  importance,  for  they  show  that  we 
cannot  wliolly  rely  on  what  is  truly  for  the  self-interest  of 
the  trust  to  protect  us  from  extortion;   that  the  trust  can 


Prices  and  Potctuial  Competition         iig 

aclually  for  a  time  be  an  extortionate  monopoly;  and  yet 
that  publicity  is  sure,  eventually,  to  break  down  the  most 
powerful  monopolies.  The  raising  of  the  price  of  ice  by 
the  American  Ice  Co.  occurred  early  in  May.  As  has  been 
said,  the  price  was  doubled — an  extortionate  exaction, 
'i'liere  seemed  at  first  no  possibility  of  elsewhere  obtaining 
a  supply  of  ice  and  no  means  of  obtaining  a  reduction  oi 
price;  but  the  institution,  by  Attorncy-deneral  Davics,  of 
legal  proceedings  to  procure  the  dissolution  of  the  trust, 
and  the  commencement  of  criminal  actions  against  its  or- 
ganizers, and  a  general  publicity  of  the  alTairs  of  the  com- 
pany in  the  daily  press,  and  the  starting  of  a  few  competi- 
tive ice  producing  plants,  have  caused  a  reduction  in  the 
price  to  about  the  former  level.  On  the  22d  of  May,  The 
Xeir  Yorl-  World  editorially  said: 

'■  The  sun  of  publicity  will  soon  melt  the  ice  trust." 

On  the  first  day  of  June,  The  liochcsfer  Democrat  and 
Chronicle  stated: 

"  The  ice  trust  in  New  York  has  dropped  prices  to  forty  cents  a 
hundred  (this  from  sixty  cents;  last  ye;;r's  price,  thirty  cents) 
and  is  makintr  an  effort  to  fjet  back  its  old  customers.  ^lost  of 
tliem  have  made  contracts  with  independent  concerns  and  tiie 
]iuni>hn;ent  of  greed  {)romi:^es  to  be  speedy."' 

IJiit  what  inconveniences  the  people  of  the  metropolis 
had  to  suffer  before  the  price  was  reduced,  and  what  meth- 
ods were  ado])ted  to  suppress  the  weak  competitors  that 
ni'Oie,  mav  l)e  gathered  from  xhc  following  extract  from 
The  Xeir  York  Herald  of  dune  (!th.  Though  a  long  quo- 
tation, it  is  well  worth  reading,  for  it  sets  forth  the  facts 
of  ilie  fight  against  the  ice  trust,  which  make  the  case  in 
many  respects  a  typical  one.  This  article  is  really  an  epit- 
nme  of  trust  methods,  and  it  also  shows  fairly  well  both 
tiie  strength  and  the  limit  of  monopoly  powers: 


I20  The  Trusts 

"ICE    TRICES    BEING    IIAilMERED    DOWN. 


INROADS     OF     JXDErKNI>I<:NT     DKALEJ5S     FORCING     AMERICAN     COM- 
TANY     TO    J)ESI'EKATK    MEASURES     TO     DEFEAT     THEM, 


DiXOY    COMI'ANIES    MAKING    BIG    CUTS. 


FORTY,    FJFTY    AND    SIXTY-iaVE    (;ENTS     CHARGED    IN    THE    SAME 
APARTAIENT    HOUSE, 


BY    THE    SAME    ICEMAN,    TOO, 


ATTORNEY-GENERAL    AND    C:ONT];OLIVER    DETERMINED    NOT    TO    BE 
LED    INTO    ERRO]i. 

It  now  appears  tliat  the  American  Ice  Company  has  troubles 
other  than  tliose  of  a  Icf^al  nature.  While  it  has  l)een  fighting  the 
attenipts  to  make  public  its  stock  book,  independent  dealers  have 
been  getting  such  a  foothold  tliroughout  a  large  section  of  the 
city  that  the  American  Ice  (^onipany  has  been  compelled  to  cut 
the  sixty-cent  price  to  meet  the  opposition. 

The  situation  is  uiii()ue.  The  American  Ice  Company  has  kept 
several  of  tiie  small  concerns  that  v.ere  taken  into  the  fold  busy 
in  meeting  Uw.  outside  icemen.  Tliese  small  companies  run  their 
old  wagcms  and  deny  ccmnection  with  the  American  Ice  Company, 
but  in  reality  handle  its  ice.  It  is  the  constant  endeavor  of  these 
icemen  to  get  customeis  away  from  tlie  few  independent  dealers. 
This  has  been  done  wherever  necessary  by  deeply  cutting  rates. 

Ajiparently  this  method  of  doing  business  is  not  confined  to  any 
one  ])'irt  of  the  city.  Wlierevcr  the  indei)endent  icemen  have  ob- 
tained customers  the  American  Ic(^  C()ni])aiiy  has  met  the  re- 
duced j)rices.  The  sixty-cent  rate  has  been  rigidly  maintained  at  all 
of  the  Ainerican  Ice  Company's  oUices,  and  nobody  has  got  cheaper 
ice  wlio  lias  not  worked  to  get  it.  As  a  consequence,  tbere  is  many 
an  afiartTucnt  building  in  Ilailem  and  on  llie  w(>st  side  wliere  the 
families  on  all  the  dilbn'erit  lloors  arc  paying  dilferent  prices  for 
ice.     In  some  instances,  too,  the  variations  are  considerable. 

PRICES   VARY    IN    SAME   HOUSE. 

In  fino  house  fliat  was  visited  yesterday  the  family  on  the  first 
floor  piiid  forty  cents,  the  family  on  the  next  floor  sixty-five  cents 


Prices  and  Potential  Competition         i2t 

and  the  family  on  the  top  floor  fifty  cents.  The  two  extremes 
were  cliarged  by  the  same  iceman. 

'J'his  rate-cutlinp,  altogether  irregular,  has  given  rise  to  several 
rumors  that  the  American  Jce  Company,  fearing  the  public  wrath, 
was  lowering  its  sixty-cent  rate.  There  is  evidently  no  other  foun- 
dation for  tlie  news,  since  all  the  regular  ollices  of  tlie  American 
Ice  Company  (juote  ice  at  retail  to  families  at  sixty  cents — or 
sixty-five  cents  if  there  is  any  good  excuse  for  such  a  charge.  Any 
one  wjio  cares  to  get  ice  cheap  has  but  to  patronize  one  of  the 
independent  dealers  and  the  American  Ice  Company  will,  through 
one  of  its  decoy  companies,  meet  the  cut. 

This  is  not  in  all  cases  easy  to  do,  for  the  independent  companic.i 
arc  so  rushed  with  business  sin-cc  the  agitation  began  that  they 
cannot  get  tcagons  to  haul  the  ice  that  is  ordered.  It  has  been  a 
bonanza  for  the  outside  concerns.  Half  a  dozen  of  the  smaller 
independent  dealers  are  now  planning  to  manufacture  ice  for  them- 
selves, and  will  without  doubt  make  money  out  of  the  venture  if 
the  American  Ice  Company  does  not  lose  lieart  and  do  away  with 
the  sixty-cent  price.  One  dealer  in  West  Seventeenth  Street  is 
making  preparations  to  manufacture  two  hundred  and  fifty  tons 
of  ice  daily. 

GETTING    ICE    IX    NEW    JERSEY. 

Pending  the  construction  of  ice-making  plants  the  independent 
dealers  are  buying  ice  in  Jersey  City  and  carrying  it  a^^ross  the 
ferries  in  tlieir  own  wagons.  There  are  two  companies  in  Jersey 
City  that  sell  ice  shipped  in  from  ice  houses  on  lakes  and  ponds 
in  Pennsylvania.  The  ice  comes  over  the  Tennsylvania  Kailrocul. 
and  this  led  some  of  the  dealers  to  suspect  that  the  railroad  com- 
p;;ny  \\as  really  fathering  the  scheme. 

At  the  docks  controlled  by  the  American  Ice  Company  the  price 
(wholesale)  charged  outside  icemen  in  New  York  is  $7  a  ton,  or 
thirty-flve  cent--^  a  hundred  pounds.  These  d^)cks  arc  practically 
all  in  the  city,  for  hut  two  indcpoid*  nt  dealers,  seemingly,  have 
facilities  on  u'ha)Tes.  One  of  these  concerns,  ^lontgomery's,  is  on 
the  Nortii  Ki\('r.  and  the  other,  Solomon's,  is  on  the  East  Kiver. 

Instead  of  buying  in  New  ^'ork,  the  outside  icemen  cross  tlie 
river  to  Jersey  City  at  1  (/clock  in  the  morning  and  buy  ice  there. 
Tiny  peg  ^'^  a  ton  inshod  of  .■r".  but  when  tlie  ferriage  is  add  d 
and  :iii  allo-.'.anc(>  is  made  for  the  dri-.er's  time  and  for  melting,  tlie 
(■n>t  of  tlie  ice  runs  up  to  ^L-l'i  a  !un.     With  this  Jersey  ice  the 


i22  The  Trusts 

independent  dealers  have  already  forced  the  American  Ice  Com- 
pany to  cut  its  sixty-cent  rate  in  almost  every  street  in  the  city.'' 

Two  days  later  the  prevailing  rate  was  forty  cents;  a  week 
later  it  was  reported  to  be  thirty  cents.  Doubtless  the 
reduction  was  due  both  to  the  legal  proceedings  instituted 
against  the  trust,  and  also  to  the  fear  of  competition  next 
season  as  a  result  of  the  publicity  given  to  the  trust's 
profits. 

Potential  competition  is  also  an  imperfect  remedy,  be- 
cause, when  called  into  activity,  it  so  frequently  is  the 
struggle  of  the  weak  against  the  strong.  The  competitors 
are  not  on  a  level  footing,  and  the  contest,  besides  being 
unequal,  is  unscrupulously  conducted. 

There  is  competition  and  competition;  first,  that  compe- 
tition which  seeks  to  attract  purchasers  by  better  goods  and 
lower  prices,  but  at  prices  that  mean  fair  profits  and  a 
continuance  in  business;  and,  second,  that  competition 
which  lowers  prices  below  the  fair  profit  mark,  and  the 
purpose  of  which  is  not  to  secure  custom  for  the  one  so 
lowering  the  price,  but  to  drive  it  away  from  a  competitor. 
The  one  form  of  competition  is  healthful  rivalry;  the  other 
is  a  war  of  extermination.  One  is  the  life  of  business;  the 
other  its  death-blow.  Competition  favors  the  strongest 
competitors.  The  big  usually  survive.  It  is  the  survival 
of  the  biggest  rather  than  the  fittest  that  frequently  results 
from  competition  as  it  is  practiced.  "  Cut-throat "  com- 
petition is,  in  no  sense,  a  practice  peculiar  to  trusts.  But 
when  employed  by  trusts  it  is  a  menace  to  the  public,  for 
the  great  trusts  have  the  power  to  withstand  the  effects  of 
competition  longer  than  their  small  rivals.  In  so  far  as 
this  is  the  result  of  their  ability  to  produce  or  market  more 
clieaply,  whieli  is  frequently,  if  not  generally,  the  case,  we 
c,;nnot  find  fault  with  tlie  c()mi)etition,  for  the  community 
wants  cheapened  jiroduction,  j)rovided  it  is  not  secured  by 


Prices  and  Potential  Competition         123 

a  degradation  o£  the  working  classes;  and  the  community 
\vants  lower  prices,  provided  they  are  not  inconsistent  wilh 
fair  profits.  Jhii  eoiirpetitors  do  not  confine  themselves 
within  these  limits.  They  arc  merciless  in  their  methods, 
rrize-lighters  do  not  hit  below  the  belt,  hut  the  methods 
of  business  comi)etitors  are  usually  more  brutal  than  prize- 
fighting. With  business  competitors,  it  is  war  to  tlu?  death. 
Trusts  are  prohably  no  worse  than  individual  cojnjjctitors 
in  this  respect;  but  their  powers  are  greater,  and  the  result 
of  acts  done  hy  them  is  more  injurious  tlum  when  done  b_y 
fecl)le  individuals. 

In  an  earlier  chapter  we  showed  that  competition  was 
the  mother  of  trusts.  Trusts  are  ])orn  of  comi)etition, 
conceived  for  the  ])urpose  of  killing  competition;  and  vet 
they  use  competition  as  a  method  of  exterminating  coni- 
petiiors.  ''Jdns  paradox  calls  to  mind  the  story  of  the  min- 
ister who  once  preached  two  sermons  as  a  candidate  for  a 
certain  church  which  was  without  a  pastor.  ]lis  morning 
discourse  was  from  the  passage:  '"Ye  are  of  your  father, 
the  devil.''  His  evening  text  was:  ""'  Children,  obey  your 
parents."  When  it  comes  to  the  struggle  of  getting  husi- 
ness  or  killing  off  a  rival  in  trade,  the  methods  of  the  trust 
relleet  credit  upon  its  mother,  cut-throat  competition.  A 
good  deal  depends  upon  whether  tlie  new  com])etilor  is 
amnluT  giant  trust  or  a  struggling  individual  enterprise. 
If  it  is  a  case  of  rival  trust,  there  may  l)e  keen  and  intense 
competition;  but  if  it  is  a  case  of  the  trust  against  the 
weak  and  struggling  individual  producer,  tlu're  will  be  the 
rankest  of  unfair  methods.  'Wlu'ii  Trust  meets  Trust, 
'•'  then  comes  the  tug  of  war;"'  but  wluMi  the  Trust  meets  an 
individual  com])etitor,  then  the  Trust  conducts  itself  like 
a  tliug  of  the  slums. 

Small  com])eiitiv(>  concerns  will  sju'ing  u])  more  quickly 
than  will  great  ones.      Oftentinu's  the  results  of  careful  in- 


124  The  Trusts 

dividual  attention  to  a  small  business  will  ofiset  the  ad- 
vantages of  (,Teater  capital  managed  by  agents  and  sub- 
ordinates. Such  new  small  concerns  can  succeed  against 
extortionate  prices,  and  sometimes  even  where  prices  are  at 
the  fair  profit  mark.  But  what  do  they  meet  with  from 
trusts?  Cut-tliroat  competition.  What  is  the  action  of 
trusts  in  such  cases  with  regard  to  prices?  It  is  a  lowering 
of  tliem  in  the  particular  locality  where  the  small  hand 
of  competition  has  arisen, — lowering  them  below  the  fair 
profit  mark,  lowering  them  sometimes  below  actual  cost  of 
production,  lowering  them  at  any  rate  to  a  point  where 
the  small  competitors  will  eventually  be  driven  from  busi- 
ness. Why?  Because  they  have  dared  to  compete.  For 
Avhat  purpose?  In  order  to  kill  the  competition  and 
restore  the  old  prices,  or  even  to  exact  eventually,  higher 
prices  that  will  compensate  for  the  enforced  decrease  that 
was  made  to  kill  competition.  The  community  is  inter- 
ested in, — yes,isl)enefited  Ijy  low  prices:  but  it  is  injured  by 
sacrifice  sales,  by  "  slaughters,"  by  cut-throat  competition. 
Sales  at  a  loss  soon  al)sorb  the  limited  capital  of  the  weak 
competitor,  but  the  loss  of  the  trust  on  this  fractional  por- 
tion of^  its  business  is  more  than  made  up  by  its  extortionate 
prices  in  other  localities.  Sometimes  the  trust  reduces  its 
price  below  cost  in  all  localities.  It  is  the  party  with  the 
largest  purse  that  can  stand  this  cut-throat  competition  the 
longest,  and  that  party  is  always  the  trust. 

The  kind  of  competition  just  outlined  is  in  its  nature,  at 
]ca>t,  cons])iracy.  It  is  tlie  use  of  one's  property  not 
directly  for  one's  own  benefit,  but  for  the  injury  of  another. 
It  violates  the  spirit,  if  not  the  letter,  of  the  law  against 
conspirafv.  There  should  lie  no  doubt  as  to  whether  or 
not  it  (loos.  If  doubt  exists,  statutes  should  be  enacted  so 
as  t'i  expi'ess  in  no  ambiguous  terms  their  )iri)hibition  of 
sucli  competition.     It  should  Ije  declared  criminal  so  tlmt 


Prices  and  Potential  Competition         125 

the  strong  arm  of  the  state  could  punish  the  wrong.  Leave 
a  struggling  coni})etit<)r  to  his  i-emody  for  damages  for  the 
injury  done  him,  and,  even  supposing  that  he  has  a  remedy, 
the  expense  of  enforcing  it,  and  the  dilliculty  of  showing 
the  amount  of  the  damages,  nuikes  any  real  relief  imi)ossi- 
ble.  Th(!  selling  by  an  incor])oratetl  com})any  of  goods  ot 
a  certain  quantity  and  of  a  certain  quality  or  cost  of  pro- 
duction in  one  locality  at  a  lower  or  diifereiil  price  or  on 
dilferent  terms  or  conditions  than  are  llxed  for  them  in 
any  other  place  (dilference  in  cost  of  transportation  and 
rent  and  selling — local  differences — being  allowed  foi) 
should  be  made  criminal,  unless  a  hoiia  fide  competitor  actu- 
ally sells  at  this  or  a  lower  price  in  the  same  or  substan- 
tially the  same  quantities.  These  great  corporations  are  cre- 
ated by  the  state.  Their  rights  to  do  business  are  derived 
from  the  })eople.  They  are  supposed  to  serve  all  the  peo])le 
alike.  They  are  incorporated  because  they  are  su})posed  to 
be  of  service  to  the  people  at  large.  They  are  subject  to 
limitations  by  the  popular  will.  Such  regulations  as  sug- 
gested are  consistent  with  the  theory  of  corporations  and 
the  purposes  of  their  formation.  If  trusts  were  forbiddeu 
by  law  to  sell  their  product  at  any  ])oint  for  a  less  price 
(difference  in  transportation  and  rent  and  other  local  con- 
siderations being  allowed)  than  they  sell  it  at  all  other 
]Kjints — if  when  they  reduce  the  ])rice  to  kill  one  small 
competitor  they  were  obliged  to  reduce  it  wherever  they 
liad  competitors,  this  cut-throat  eom]ietition  method  of  ex- 
terminating rivals,  the  sole  ])ur]jose  of  which  is  to  obtain 
a  monopoly  and  the  ])ower  of  extortion,  would  be  one  that 
would  be  far  less  fre(|UiMUly  em])loyed.  Akin  to  the  metliod 
of  selling  bi'lcjw  co>i  in  one  locality  in  order  t(j  exterminate 
the  rivals  of  the  trusts,  is  the  jiractice  of  the  great  trusts, 
that  make  many  artieles  or  many  styles  of  the  same  article, 
to  refuse  to  sell  anv  of  the-e  jinieles  to  the  retailer  unle.-s 


126  The  Trusts 

he  will  agree  to  buy  exclusively  from  them.  The  effect 
of  such  an  arrangement  is  to  destroy  the  trade  of  the  feeble 
competitor  who  makes  but  one  article  or  one  style.  Such 
lias  been  the  method  employed  by  the  tobacco  trust.  If 
these  great  corporations  whose  powers  are  derived  from  the 
people  and  who  are  given  the  right  of  incorporation  by  the 
people  only  ])eeause  it  is  believed  that  indirect  benefits  of 
great  value  will  accrue  to  the  people,  were  compelled  by 
law  to  sell  their  products  to  any  person  tendering  them  the 
price,  just  as  common  carriers  are  bound  to  serve  all  at  the 
same  rate, — if  such  a  statute  could  ])e  enacted  and  en- 
forced,— potential  competition  would  be  a  far  more  power- 
ful force. 

The  great  weakness  of  potential  competition  is,  how- 
ever, that  it  is  an  uneconomic  remedy.  Potential  competi- 
tion is  worthless  if  it  is  never  to  become  active  competition; 
but  in  scarcely  an  industry  has  a  trust  been  formed  where 
the  ])roductive  agencies — the  factories  and  mills — merged 
into  the  trust  did  not  liave  a  capacity  in  excess  of  the  con- 
suming power  of  the  public;  and  neai'ly  all  of  our  trusts,  as 
has  been  noted,  have  absorbed  all  or  nearly  all  of  those 
ju'oductive  agencies.  If  tliey  unduly  raise  prices,  al- 
though comjjetition  will  doubtless  eventually  appear,  yet 
it  is  absolutely  certain  that  the  potential  competitor  will 
lie-jtate  a  very  long  time  before  entering  into  active  com- 
]i'.'liti(.)n.  for  he  knows  that  there  is  no  need  of  new  fac- 
loi'ics;  and  that  the  demand  of  tlie  public  will  not  sustain 
both  the  new  factory  and  the  ohl  factory;  and  that  in  the 
*onipclilivc  sti'uggle  eitlu'i'  the  now  competitor  or  the  trust 
\i\\  tail,  or  else  the  trust  will  absorb  the  new  competitor 
ind  form  a  new  combination,  and  then  })lace  tlu^  ])rice  iiigh 
♦■jiouLfii  .-o  ;i^  to  recoup  the  loss  due  to  the  previous  struggle 
<;f  com  j)ct  it  idii.  This  know]edg(_'  of  tlie  ]iotciitial  comjjeti- 
tor  that  tlu/re  is  really  not  room  for  a  new  esiabli-limoiit  in 


Prices  and  Potential  Competition         127 

tlie  industry  is  also  kno\vled<2;e  possessed  ])y  the  trust  man- 
agers; and  knowing  that,  tlicy  realize  that  even  although 
they  raise  their  ])rices  somewhat  above  the  fair  profit  mark, 
yet  there  is  a  very  jjowerful  restraint  upon  the  establish- 
ment of  new  competition,  entirely  independent  of  the  re- 
straint that  springs  from  the  would-be  competitors  knowl- 
edge that,  if  he  enters  the  struggle,  he  will  be  met  with  cut- 
throat competition  by  the  powerful  trust,  and  independent, 
too,  of  the  would-be  competitor's  knowledge  that  even  if 
cut-throat  competition  is  not  attempted,  yet  the  trust  will, 
when  competition  asserts  itself,  at  least,  reduce  its  extor- 
tionate prices  to  the  level  of  fair  profits.  The  mere  aggre- 
gation of  capital,  even  although  that  aggregation  possesses 
all  of  the  productive  agencies  in  any  one  industry  and  even 
although  those  productive  agencies  are  more  than  able  to 
satisfy  the  public  demand,  probably  does  not  in  itself  con- 
stitute a  mon()])oly.  It  is  not  the  aggregation  that  stops 
the  establishment  of  new  competitive  enterprises,  but  the 
fact  that  the  total  capacity  is  in  excess  of  the  demand.  The 
existence  of  a  number  of  productive  agencies  having  a 
ca])acity  in  excess  of  the  demand  is  always  a  restraint  upon 
competition.  If  they  are  separately  and  individually  con- 
trolled, the  restraint  upon  competition  is  ]Trobal)ly  fuUy  as 
mucli  as  if  they  were  all  combined  into  one  trust.  Indeed, 
ex])erienco  goes  to  show  that  persons  would  rather  start 
new  establishments  in  industries  in  whicli  tliero  are  trusts, 
if  tliey  couhl  be  sure  that  the  trust  would  not  resort  to 
'■'cut-throat"  or  unfair  com])etition,  for  })rices  would  be 
more  a])t  to  be  ke])t  stable.  I^ut  tlie  vital  fact  remains  that, 
whenever  in  a  givt'n  industry  the  ])roductive  forces  have 
a  capacity  in  excess  of  tlie  demand,  the  establishment  of 
new  competitive  concerns  is  not  only  unneeded,  but  there  is 
a  restraint  upon  it.  (iranting  that  this  is  as  true  when  the 
various  mills  and  factories  of  the  industry  are  separately 


128  The  Trusts 

owned  and  managed  as  when  they  are  comhined  and  con- 
solidated, the  further  momentous  fact  remains  that,  in  ease 
of  a  consolidation,  under  such  circumstances,  of  all  the 
factories  and  mills  in  operation,  there  is  the  possibility,  by 
reason  of  the  union,  of  the  exercise  of  monopolistic  powers, 
Ijccause  active  competition  has  been  restrained  and,  new 
competitive  establishments  being  unneeded  in  order  to 
supply  the  demand,  potential  competition  is,  therefore,  a 
Aveak  corrective  force.  When  the  sugar  trust  was  known 
to  have  in  its  refineries  a  capacity  four  times  as  great  as 
the  consumption,  is  it  to  be  w^ondered  that  people  long 
hestitated  about  starting  competing  refineries,  even  al- 
though the  sugar  company  for  many  years  paid  twelve  per 
cent  dividends  upon  its  common  stock  and  seven  per  cent 
upon  its  preferred,  and  although  it  was  known  to  be  capi- 
talized for  much  more  than  its  cost?  Supposing  the  whisky 
trust  had  extortionately  advanced  its  prices,  would  it  not 
liave  been  business  folly  for  a  person  to  establish  a  new  dis- 
tillery, when  the  whisky  trust  had  been  able  to  close  almost 
six-sevenths  of  its  distilleries  and  yet  had  been  able  to  fur- 
nish with  the  twelve  that  it  continued  to  operate  the  same 
output  as  before  had  been  actually  produced  by  the  entife 
eiglity  that  it  owned?  Is  it  not  because  the  would-be  com- 
petitor fuily  realizes  that  the  Carnegie  Company  and  the 
other  great  steel  companies  control  mills  and  plants  that 
can  easily  supply  the  average  demand  of  the  public,  that  so 
little  competition  springs  up  in  that  ])usiness,  notwith- 
standing it  is  asserted  upon  good  autliority  tliat  the  Car- 
negie Company,  with  its  plants  costing  not  more  than  $25,- 
00(),()0(),  ^^■]]]  inake  from  $2r),000,Oo6  to  $1(),()00,00{)  net 
profit  in  Hiis  one  year?  Is  not  one  reason  that  the 
Standard  Oil  Ccirnpany  has  so  little  competition,  not- 
withstanding its  dividends  amount  to  tliirty  or  forty  mil- 
li(ms  of  dollars  each  year  upon  a  watered  capitalization  of 


Prices  and  Potential  Competition         129 

one  hundred  millions,  the  fact  that  the  Standard  Oil  Com- 
])any  has  ample  facilities  for  supplying  the  whole  country 
and  the  export  trade  with  oil? 

Yet,  while  there  is  this  resti'aint  ui")on  competition, 
causetl  by  the  existence  of  more  plants  than  are  needed,  it 
is  a  fact  established  by  exj)erience  that  sooner  or  later  there 
will  be  men  with  enough  daring,  enough  courage,  and 
enough  ho])efulne.-s  to  start  new  competing  establishments. 
As  longaswealth  keeps  on  increasing  t'lis  isbound  to  occur, 
because  men  will  put  their  money  into  some  enterprise  and. 
they  will  put  it  into  that  whicli  seems  to  yield  the  greatcs.; 
profits.  For  a  time  they  may  be  restrained  from  putting  it 
into  enterprises  which  trusts  appear  to  have  monopolized, 
but  eventually  they  will  do  so;  and  the  higher  the  price 
charged  by  the  trust  the  more  speedy  will  be  the 
relief  of  competition.  But  the  State,  through  its 
legislature,  has  a  right  and,  in  fact,  owes  it  as  a  duty  to 
itself  to  stop  even  tem})orary  monopoly;  and  if  the  only 
practical  means  of  doing  so  is  to  forbid  such  aggregations 
of  capital  as  will  absorb  all  the  productive  agencies  of  any 
industry,  then  that  means  should  be  adojited.  This  is  the 
only  justification  for  anti-trust  statutes  which  aim  to  abol- 
ish and  not  to  regulate  coml)ination.  l^ossibly  in  view  of 
the  fact  that  coin[)etition  is  l)ound  to  spring  uj),  and  that 
j)crha])s  in  the  long  run  we  may  be  gainers,  it  is  unwise  to 
go  so  far  as  to  al)olish  trusts.  lUit  the  evils  of  even  a  tem- 
porary mono])oly  are  so  great  that  the  ^[ucstion  is  worthy  of 
])rofoun(l  study.  \l\  indeed,  ti'u>ts  that  merge  into  one 
organiz;uion  all  the  ])roduciive  agencies  and  secure  the 
means  of  su])plying  ihe  entire  demand, tlu'reby  restrain  and 
hamper  and  I'l'pi'cs-  the  establi.-hnient  of  new  enterprises, 
then  it  is  pos.-iMc  il'.at  even  ]'ub]icity  will  not  b(>  a  ])erfect 
renuMJy:  ih:U.  uhilc  ii  nuiy  ultiniati'ly  c;ill  coni])etition  into 
existence,  it  ciUinol  ilo  so  to  eorreel  ortsent  evils,  ahhouirh 


130  The  Trusts 

our  experience  so  far  would  indicate  that  publicity  was 
a  speedier  and  more  effective  remedy  than  an  appeal  to  tho 
courts  to  enforce  anti-trust  laws.  If  aggregations  of  all 
the  productive  agencies,  having  the  power  to  supply  the 
entire  demand,  and  for  that  reason  dissuading  men  from 
entering  new  competitive  enterprises,  can  acquire  tem- 
porary monopoly,  then  the  prohibition  of  over-capitaliza- 
tion and  of  dishonest  corporate  methods,  and  the  imposi- 
tion of  taxation,  and  the  fullest  publicity,  while  they  may 
save  us  from  a  vast  majority  of  the  evils  of  trusts,  will  not 
save  us  from  undergoing  for  a  time,  at  least,  its  monopo- 
listic evils.  It  is  this  restraint  of  competition  which  arises 
whenever  it  becomes  known  that  existing  productive  agen- 
cies are  sufficient  to  supply  the  demand,  and  which  enables 
one  aggregation  of  all  those  agencies  to  be  a  monopoly  for 
a  time,  at  least, — it  is  this  restraint  which  is  a  justification 
of  laws  against  such  all-absorbing  combinations.  It  is  this 
which  makes  it  right  for  us  to  treat  such  trusts  as  monopo- 
lies, and  to  require  their  dissolution,  and  also  to  demand 
the  punishment  of  their  organizers  and  managers.  It  is 
this  wliicli  is  the  ])asis  of  the  Xew  York  statute  against 
combinations  and  monopolies. 


CHAPTER  VII. 

TRUSTS    AXD    THE    ^^'AGE-EARNER. 

Next  to  the  accusation  that  they  unduly  and  extortion- 
ately  raise  prices,  tlio  strongest  charge  in  the  indictment 

against  trusts  is  tliat  they  luive  the  ])ower  to  reduce  wages, 
and  that  when  their  supremacy  is  obtained  they  will  ex- 
ercMse  this  power.  It  is  said  that  when  a  trust  has  obtained 
complete  control  of  an  industry,  all  the  men  engaged  in 
ihat  industry  will  be  utterly  at  its  mercy;  that  there  will 
be  no  competitive  demand  for  their  services  by  others  in 
that  industry,  for  there  will  bo  no  others;  that  in  just  the 
degree  that  they  have  become  s})ecially  skilled  in  that  trade 
or  industry,  they  will  find  it  dilheult  to  turn  their  energies 
into  other  channels;  that  they  must  therefore  take  the 
vrages  which  the  trust  will  ])ay,  or  starve, — worse  thaii  that, 
see  their  de))endcnts  starve;  that  they  will  be  white  slaves. 
It  is  further  said  strikes  will  lose  their  elfecti ve]u\-s,  unless 
universal,  because  the  shut-down  of  oiu^  or  two  of  a  large 
nunitjcr  of  factories  will  be  of  little  injury  to  a  trust,  since 
it  can  und(Uibtedly  in  its  other  factories  produce  enough 
to  satisfy  the  market. 

One  thing  must  he  conceded.  Combinations  of  capital 
must;  ])('  oll'-st't  by  combinations  of  workingmen.  If  we 
are  to  hav(>  tru-is  of  national  scope.  labor  unions  of  na- 
tional sco[)o  arc  ncci'ssary;  and  sui'h  unions  should  be  en- 
couraged rather  than  discouraged.  If  all  over  this  country 
a  combination,  of  ca})ilalists  is  to  have  the  power  or  the 

131 


132  The  Trusts 

legal  right,  speaking  either  as  a  combination  of  persons 
or  as  one  corporate  entity,  by  a  single  notice  to  reduce 
wages,  the  wage-earners  should  have  an  equal  right  to 
combine  to  demand  higher  wages,  and  to  refuse  to  work, 
and  to  urge  and  induce  their  fellow  workmen  to  refrain 
from  working,  unless  those  wages  are  paid.  This  may  be 
common-law  conspiracy  but  it  is  common  sense.  The 
necessities  of  those  dependent  upon  wages  demand  tlie  ex- 
istence of  such  organizations,  and  necessity  knows  no  law. 
If  capitalists  form  national  trusts,  let  the  labor  unions,  too, 
become  national  if  possible.  Then  let  them  act  together 
as  a  unit  in  fixing  fair  wages  for  the  whole  territory. 

There  are  those  who  claim  that  the  larger  the  concern, 
the  greater  the  damage  by  reason  of  a  shut  down,  and 
the  greater  the  demoralization  of  the  organization  by  rea- 
son of  a  suspension  of  work;  that  a  strike  or  anything 
causing  an  interruption  of  business  is  as  disastrous  to  a 
large  enterprise  as  to  a  small  one,  if,  indeed,  not  more  so; 
that  strikes  are  sure  to  bring  into  activity  that  which 
trusts  dread  more  than  any  other  thing,  namely,  competi- 
tion; that  they  furnish  the  opportunity  for  building  up 
a  rival  business;  and  that  for  these  reasons  among  others, 
trusts  are  more  apt  to  grant  the  reasonable  demands  of 
labor  than  are  mere  individual  industries.  "We  do  not 
believe  that  it  is  true  that  strikes  will  be  as  effective  against 
large  trusts  as  against  individual  competitors.  The  latter 
know  for  a  certainty  that  a  strike  means  that  their  com- 
petitors will  surpass  them;  while  the  trust,  if  it  controls 
all  the  plants  of  the  industry,  has  only  the  fear  of  a  possible 
competition,  whicli  can  in  few  cases  become  established 
and  active  during  the  continuance  of  the  strike.  In  facl, 
the  very  existence  of  tlie  strike  will  deter  competition,  be- 
cause it  leads  men  to  believe  that  profits  must  be  small  if 
good  wages  cannot  be  paid.     But  trusts  arc  by  no  means 


Trusts  and  the  Wage-earner  133 

wholly  free  from  the  innucnccs  of  strikes,  and  tlioy  are, 
furthermore,  in  a  ])osition  where  they  can  more  easily 
alTord  to  jiay  iiigh  wages  than  can  competitive  concerns. 
It  is  to  their  interest  to  get  along  harmoniously  with  their 
employees,  and  they  are  so  far  ahle  to  recoup  what  they  pay 
out  as  wages  that  the  probahility  is  that  trusts  will  raise 
wages  and  add  the  increase  to  the  selling  price  rather  than 
run  the  risk  of  a  strike. 

To  the  extent  that  competition  is  diminished,  an  em- 
ployer is  better  ahle  to  pay  high  wages.  With  active  com- 
petition he  is  compelled  to  sell  his  goods  at  extremely  low 
prices.  It  is  well  known  that  in  many  lines  of  business, 
this  selling  price  hardly  affords  a  profit;  therefore  wages 
must  necessarily  bo  kept  at  the  lowest  level.  If  a  com- 
jictitor, — a  weak,  struggling  competitor,  hardly  able  to  keep 
in  the  struggle, — cuts  down  his  employees'  wages  so  that 
he  may  if  possil)lo  eke  out  a  profit,  in  time  the  stronger 
competilor  will  follow  suit.  Competition  between  pro- 
ducers means  a  constant  attempt  to  get  cheaper  labor  and 
material.  The  employer,  if  heartless,  can  do  much  to  re- 
duce wages.  The  excessive  competition  that  wipes  out 
profits  is  the  competition  that  wipes  out  the  fund  for  the 
payment  of  fair  wages.  The  consolidations  that  can  effect 
economics  of  production,  tliat  can  yield  profits  Avithout 
extortionate  prices,  can  give  good  wages  and  permanent 
employment.  J>ut  independently  of  their  ai)ility  to  pay 
better  wages  because  of  tlicir  ability  to  produce  more 
chea})Iy.  if  all  the  factories  in  a  given  industry  are  com- 
bined in  a  trust,  the  wages  can  bo  raised  to  a  proper  point. 
It  sini})Iy  adds  to  the  cost  of  jirotluction  and  this  is  added 
to  the  selling  jirice.  Jt  comes  out  of  the  consumer,  not 
out  of  the  pi'oduccr.  If  not  all.  but  nearly  all  of  the  fac- 
t(>rics  in  any  industry  arc  absorbed  in  one  trust,  it  makes 
it  much   easier  f^u"  a  union   to  deal  with  the  owners  of 


134  The  Trusts 

offending  factories,  and  much  easier  for  the  owners  of  in- 
dependent factories  voluntarily  to  raise  wages,  because 
they  know  that  the  great  trust  will  also  pay  good  wages. 
Assuming  that  a  trust  is  a  monopoly  and  can  fix  prices  as  it 
chooses,  it  can  afford  to  pay  the  highest  wages,  for  they 
will  bo  added  to  the  other  elements  of  cost  and  recovered 
in  the  selling  price.  The  highest  rate  will  under  such 
circumstances  be  apt  to  be  ])aid  l)ecause,  assuming  the  trust 
desired  to  raise  prices  unduly,  it  would  want  to  make  high 
wages  the  penance  or  pretext  for  its  exactions. 

As  far  as  the  trust  aU'ects  wages,  we  firmly  believe  that 
the  most  likely  result  is  that  its  owners  will  form  an  allianco 
with  their  employees,  pay  them  increased  wages  so  as  to 
secure  their  good-will,  add  it  to  the  cost  of  production,  and 
increase  the  price  so  as  to  get  for  themselves  a  larger  and 
perhaps  an  undue  profit,  but  will  at  first  give  to  the  con- 
.-umers  no  share  in  the  great  economies  that  the  combina- 
tion effects.  This  is  practically  what  has  been  done  by 
the  numerous  "Trade  Alliances"  formed  in  England  by 
Mr.  E.  J.  Smith  of  Birmingham.  In  his  alliances,  em- 
ployers agree  with  their  workmen  to  employ  only  union 
men.  They  guarantee  never  to  lower  the  wages  then  ex- 
isting. They  promise  to  give  them  a  portion  of  any  in- 
crease in  the  selling  price  not  occasioned  by  an  advance  in 
the  ])ricc  of  raw  material.  This  system  does  not,  in  itself, 
occasion  any  economies  of  production  or  management  as 
do  trusts;  but  if  higher  prices  can  be  obtained,  the  work- 
men get  a  share  of  the  increase.  Higher  prices  are  ren- 
dered ])ossible  only  by  securing  the  co-operation  of  all 
union  wnrlaiicn  of  the  trade  and  bv  bovcotting  tliose  not 
in  the  alliance. 

Wage-earners  slu)uld  not,  liowever,  always  be  satisfied 
witli  mere  increases  in  wages  which  are  added  to  the  price. 
If  wages  are  increased  iifty  per  cent  and  the  price  increased 


Trusts  and  the  Wage-earner  135 

fifty  per  cent,  in  the  long  run  the  wage-earner  may  lose. 
Uranting  that  trust  invners  would  continue  the  course  of 
increasing  wages  and  adding  to  the  i)ricc,  they  cannot  ])er- 
manently  do  so.  ^>uch  a  course  is  likely  in  the  lapse  of 
time  to  hreak  down  of  its  own  weight.  Jn  the  end  it  may 
prove  ruin(nis  to  the  trusts  and  to  their  employees  as  well 
as  to  the  people  at  large.  It  will  surely  ])roduce  a  decrease 
in  demand,  a  lessening  of  production,  the  shut  down  of 
many  factories,  a  loss  of  employment,  a  lowering  of  wages, 
strikes  and  every  form  of  industrial  sulfering  and  social 
derangement.  The  raise  of  wages  which  is  most  beneficial 
to  wage-earners  is  that  which  is  an  increase  in  proportion 
to  the  final  cost  or  selling  price.  It  is  l)y  no  means  con- 
tended that  all  increases  of  wages  "which  are  added  to  the 
price  are  in  the  long  run  of  no  benefit  to  wage-earners,  or 
economically  improper.  There  arc  thousands  of  instances 
Avhere  competition  has  so  reduced  profits  that  wages  have 
been  cut  and  goods  have  been  sold  at  less  than  a  fair 
profit.  In  all  these  cases  wages  should  be  raised  and  the 
increase  added  to  the  price.  What  we  do  claim  is  that  an 
extortionate  price,  even  though  there  be  an  increase  of 
■wages  included  in  it,  is  not  only  harmful  to  the  people,  but 
may  prove  so  to  the  wage-earners  themselves.  The  two 
things  which  interest  the  workingman,  Iiowcver  much  he 
may  think  he  is  interested  only  in  the  one,  arc:  first,  an 
actual  increase  of  wages;  secoufl,  a  price  fixed  by  the  manu- 
facturer on  the  product,  wliicli  shall  not  be  so  excessive  as 
to  lessen  the  demand. 

It  is  further  to  l)e  l)orno  in  mind  that  a  blow  to  labor 
in  one  industry  is  bound  to  affect  labor  in  all  industries; 
a  harm  to  om>  cla-s  extcMids  to  all  classes,  producers  and 
consumers,  wage-earners  ami  capitalists.  Suppose  the  jirice 
of  lumber  or  df  building  hardware  is  unduly  increased; 
wluit  happens?    Le-s  lumber  sawed  and  planed  and  worked 


I  ;6  The  Trusts 


3 


lip;  fewer  logs  cut  and  transported;  but  more  than  this,— 
fewer  houses  and  stores  built.  There  is  less  work  not  on'ly 
for  the  lunil)ermen  and  the  loggers  and  the  sellers  of  lum- 
ber, but  for  the  carpenters  and  builders,  the  architects, 
the  masons  and  helpers,  the  painters  and  plumbers.  If 
men  are  out  of  employment  in  all  these  industries,  do  you 
think  even  those  who  are  kept  at  work  can  obtain  union 
-ivages?  Some  of  these  unemjjloyed  will  seek  work  in  other 
occupations,  and  this  will  tend  to  lower  wages  in  these  oc- 
cupations. But  the  evil  will  not  end  here.  There  will  be 
less  activity  in  the  real  estate  market.  With  fewer  build- 
ings there  will  be  higher  rents,  and  higher  rents  mean 
higher  taxes.  Every  storekeeper,  every  marketman,  every 
shopkeeper,  every  place  of  amusement,  every  institution 
of  education,  every  organization  for  charity  or  for  promot- 
ing religion, — everything  that  needs  money  will  find  fewer 
customers,  fewer  patrons,  fewer  supporters,  fewer  benefac- 
tors;— and  will  want  fewer  persons  in  its  employ. 

That  trusts  have  raised  the  wages  of  their  employees 
is  almost  universally  conceded.  A\'hile  some  contend  that 
the  increase  has  not  been  proportionate  to  the  increase  in 
prices,  yet  that  there  has  been  an  actual  increase  is  almost 
universally  admitted.  Before  the  Chicago  Trust  Confer- 
ence, Governor  Atkinson  of  West  A'irginia,  in  speaking  of 
the  claim  put  forward  by  trusts  that  they  pay  the  highest 
rates  of  wages  to  their  employees,  said  of  this  claim: 

"I  tliink  it  is  absolutely  true.  Trusts  pay  big  wages  because 
they  emjilfty  none  but  high-grade  men  and  women,  which  they  can 
alTord  {<>  do."' 

]^)cfV)ro  the  same  Conference  every  effort  was  made  to 
o])lain  ilie  opinions  ol  labor  leaders.  It  is  niost  significant 
that  Sainui'l  (loiii])ers,  llie  President  of  tlie  American 
Federal  ion  of  Laljor,  s|)eaking  from  tlie  standpoint  of  the 
lalx)ring  men,  ar^'ued  not  so  much  for  the  abolition  of 


Trusts  and  the  Wage-earner  137 

trusts,  as  for  the  national  organization  and  federation  of 
labor.  Like  most  students  of  llie  question  of  trusts,  he 
was  appreliensive  of  tlieir  ])o\ver,  but  he  did  not  g'O  so  far 
as  to  urge  the  complete  anniliilation  of  that  which  under 
control  or  regulation  may  perhaps  be  the  means  of  Ameri- 
can industrial  supremacy,  and  of  raising  American  wages, 
and  of  ensuring  the  consequent  prosperity  of  American 
workingmen  and  therefore  of  a  large  portion  of  Ainerican 
citizens.  That  he  was  of  the  opinion  that  the  increase  in 
the  size  of  industrial  combinations  was  not  a  menace  to 
labor  provided  labor  also  organized,  is  evident  from  this 
remark: 

"  1'liere  is  no  tenderer  or  more  vulnerable  spot  in  the  anatomy 
of  trusts  than  their  dividend-paying,'  function;  there  is  no  power 
on  eartli  other  than  the  trach'  unions  which  wields  so  potent  a 
weapon  to  penetrate,  disrupt,  and,  if  necessary,  crumble  tlie  whole 
fabric.'' 

On  tlie  same  occasion  ^I.  M.  Garland,  ex-President  of  the 
Amalgamated  Association  of  Iron  and  Steel  Workers,  said: 

"The  position  of  the  worlcer  nuiy  become  easier  as  tlie  opera- 
tion of  the  trust  proceeds;  the  example  is  set  and  the  necessity 
widened  for  every  man  in  their  emph>y  to  unite  in  common  or- 
ganization. The  farmer,  mechanic,  hiborer  and  business  man 
alike  will  feel  its  effects  for  jjfood  or  evil.  .  .  .  The  ri<.'ht  of  work- 
men, in  conference,  to  be  heard  throuj.di  their  own  selection  of 
representatives  as  to  the  rate  of  w  iiLres  and  as  to  the  hours  which 
tlie  condition  of  trade  warrants  will  become  a  fact,  and  the  farce 
meeting  now  so  often  employed  by  cajiiial  as  a  prelude  to  the 
lockout  in  order  to  eiilisi  public  sympathy,  will  di<ap])ear  under 
the  meltiuLT  rays  (if  jicaccful  relations  fnrccd  l)y  a  wider  field  of 
legitimate  tradi'  uiiinn-.  and  tin'  cuiu'ercnce  scUlement  will  take 
the  {ilace  of  the  strike  and  luik'-ut  between  emi)hiyee  and  the 
c()r]i(nate  combination.  .  .  .  Thus  far  in  this  new  day  of  trusts 
the  workmen  in  rolling  mills  find  their  in<-lination  is  to  treat 
^vith  organisation.  The  annual  wage  >cal(  s  and  agreeiuenf  were 
presented   by   our   reproeulatives   and   conferences   were   arrangeti 


1 38  The  Trusts 

promptly.  An  advance  in  wages,  ranging  from  ten  to  twenty-five 
per  eent  in  ditlerent  departments,  was  secured,  and  further  ad- 
vances in  wages  seem  assured  by  reason  of  advance  in  prices  of 
material  and  product,  which  is  one  of  our  agreements.  A  numher 
of  p]ani8  that  liaxl  been  operating  as  non-union  and  at  unfair 
wages,  icere  unionized  by  the  icage  rates  being  applied  to  them 
since  they  became  a  part  of  the  trusts.  I  would  not  be  under- 
stood to  infer  that  there  would  not  have  been  an  advance  in  wages 
if  the  trust  movement  had  not  been  on,  nor  do  we  think  the  price 
of  material  would  have  been  less,  for  we  note  that  in  branches  where 
trusts  do  not  control,  the  greater  rate  of  advance  has  occurred  in 
material.  That  in  tliis  country  a  trust,  or  the  trusts,  could  long 
maintain  an  unnatural  or  inordinate  price  for  a  material  or  a 
product  is  a  remote  contingency,  for  not  alone  would  that  cause 
other  capital  interested  in  the  consumption  of  the  product  to  com- 
bine on  as  large  a  scale  and  to  become  their  competitor,  but  the 
fact  remains  that  there  is  not  an  article  produced  in  these  modern 
times,  but  there  are,  or  can  be,  adopted  several  substitutes  for  it, 
and  the  cost,  as  a  rule,  will  not  vary  enough  to  permit  any  very 
great  or  long-lasting  extremity  to  our  needs." 

At  the  same  Conference,  David  Eoss,  Secretary  of  the 
Illinois  Bureau  of  Labor  Statistics,  said: 

"  Men  who  profess  to  betray  great  apprehension  for  the  rights 
and  liberties  of  the  people  cannot  truthfully  contend  that  these 
various  transformations  (the  consolidation  of  industrial  enter- 
prises) have  operated  to  abridge  any  of  their  privileges.  On  the 
contrary,  there  has  been  a  steady  and  substantial  forward  move- 
ment. It  has  been  further  demonstrated  that  with  each  succeed- 
ing change  there  has  come,  not  only  a  reduction  in  the  cost  of 
life's  necessities,  but  also  an  increase  in  the  wages  of  human  labor, 
with  other  improved  conditions  of  employment.  It  would  seem 
tliat  our  latest  form  of  industrial  organizations  will  prove  no  ex- 
ception to  the  rule,  so  far  as  toil's  compensation  is  concerned,  as 
wages  in  the  skilled  and  unskilled  occupations  have  recently  ad- 
vanced fully  25  per  cent.  This  upward  movement  in  wages  has 
not  been  entirely  confined  to  products  manufactured  by  the  trusts. 
In  a  few  lines  of  industry  prices  have  been  advanced  considerably 
beyond  the  increase  in  wages — not  on  account  of  any  trust  in- 
fluence— but  due  to  the  inability  of  manufacturers  to  fill  orders, 


Trusts  and  the  Wage-earner  139 

many  of  tlipm  for  foreign  markets.  When  productive  capacity  is 
more  fully  developed  {>riees  will  again  decline,  but,  under  the  new 
system,  not  so  as  to  seriously  impair  prolits  or  afl'ect  wages.  .  .  . 

••  Cireat  organizations  have  been  formed  for  carrying  on  the 
gro  \  ing  business  of  tlie  country.  During  tliis  period  the  wages  of 
Vvorkingmeu  liave  been  increased  and  the  hours  of  labor  shortened. 
The  iipplication  of  sound  principles  in  governmental  affairs  has 
aided  iii  placing  increased  comforts  within  the  reach  of  every 
\sageworker  in  the  land.  .  .  . 

"  The  oil  and  railroad  interests  of  the  country  have  been  singu- 
larly free  from  labor  disturbances.  As  a  matter  of  recent  history, 
our  most  serioiis  conflicts  have  been  with  interests  that  neglected 
to  federate.  Labor  leaders  will  agree  that  better  terms  of  employ- 
ment can.  as  a  rule,  be  obtained  from  large  than  from  small  em- 
j)loycrs.  Why,  tlien,  should  we  fear  tlie  results  of  consolidation? 
It  is  the  part  of  reason  to  encourage  a  tendency  that  will  make 
possible  higher  wages,  lower  prices,  and  less  hours  of  labor." 

Moreover  it  is  claimed  lliat  trusts  not  only  tend  to  pay 
hi;jher  wages,  but  that  they  give  .steadier  employment. 
Uncertainty  of  eni])loyment  is  as  baneful  an  injury  as  low 
wages.  Indeed,  it  may  be  much  worse.  Tlie  great  damage 
done  to  a  plant  by  shutting  down  always  makes  manufac- 
turers endeavor  to  tind  an  average  rate  of  production  that 
will  enable  them  to  supply  the  total  demand  and  keep 
running  constantly.  The  larger  the  proportion  of  the 
trade  enjoyed  by  any  one  concern,  the  better  it  is  able  to 
foresee  the  demand,  and  to  produce  enough  to  supply  it, 
witliout.  however,  over-producing.  This  is  unqualifiedly 
true  and  there  can  ])e  no  question  that  trusts  should,  and 
geiierally  do,  give  steadier  employment  than  competi- 
tive producers.  The  rule  has,  liowover,  many  exceptions 
where  unscrupulous  managers  of  great  corporations,  in 
order  to  manijuilate  stocks  for  ])urely  speculative  pur- 
poses, eitlier  over-produce,  or  arbitrarily  close  factories  in 
the  face  of  an  active  demand.  Tliere  are  manv,  indeed, 
who  claim  that  the  greater  the  concentration  of  capital 


140  The  Trusts 

and  the  larger  the  plant,  the  more  injurious  is  a  suspension. 
Tliey  point  to  the  fact  that  not  only  does  the  suspension 
damage  the  plant,  but  what  is  infinitely  worse,  it  demor- 
alizes the  force  engaged  in  managing  and  selling.  They 
argue  that  since  this  force  is  usually  well  acquainted  with 
the  particular  business  in  which  it  has  been  engaged,  since 
it  is  located  in  so  many  places,  since  it  is  an  organization 
so  difficult  satisfactorily  to  replace,  a  trust  will  do  every- 
thing possible  to  retain  it  even  when  shut  down;  that 
the  expense  of  retaining  it  is  so  great  that  every  effort 
will  be  made  to  continue  the  business  and  employ  these 
men  profitably  rather  than  pay  them  for  idleness  or  lose 
them  because  unable  to  keep  them  busy;  that  the  profit- 
able employment  of  the  managing  and  selling  force  neces- 
sitates continuous  running  of  factories  and  permanent 
work  for  wage-earners.  , 

There  is,  at  least,  a  grain  of  truth  in  this;  and  coupled 
with  the  superior  knowledge  of  the  great  trusts  as  to  pros- 
pective demand  and  trade,  it  renders  it  likely  that  under 
trusts  workmen  will  have  more  constant  employment  than 
under  a  system  of  industry  where  there  are  many  competi- 
tors whose  factories  have  a  capacity  in  excess  of  the  de- 
mand, and  whose  knowledge  of  conditions  does  not  enable 
them  to  correctly  estimate  the  demand  and  to  keep  their 
factories  running  steadily. 

It  is  a  very  significant  fact  in  connection  with  wages  and 
their  relation  to  the  increase  in  size  of  industrial  enter- 
prises that,  as  industry  has  tended  to  specialize,  as  the  di- 
vision of  labor  has  gone  on  and  men  have  more  and  more 
become  skilled  in  doing  well  some  one  piece  of  work  that 
was  in  itself  but  a  fractional  ]iart  of  an  entire  thing,  co- 
operation and  consolidation  have  become  necessary:  the 
crijTiliiTKMl  efforts  of  the  workers  have  produced  a  large 
output,  there  has  been  a  greater  abundance  and  variety 


Trusts  and  the  Wage-earner  141 

of  commodities,  ami  laborers  have  gotten  a  larger  share. 

Prices  oJ'  the  necessaries  and  comforts  of  life  have  lessened; 
}'et  wages  have  increased.  They  have  increased  not  only 
in  actual  amount,  hut  al.-o  in  i)ure'hasing  power.  In  the 
face  of  the  ineciualities  of  wealth  iliat  exist  to-day  and  of 
the  ])()verty  and  sulfering  that  are  not  infrequent,  the  fore- 
going statenieni  may  seem  untrue,  hut  it  is  the  conclusion 
]-eachc(l  hy  those  who  have  made  most  exhaustive  study 
of  the  wage  ([Ut'stion.  '^riiat  it  should  he  so,  follows  from 
natural  and  ecoTiomic  laws,  and  is  in  accord  with  moral 
lav>"s.  l\y  specialization,  hy  adoption  of  lahor-saving  ma- 
chinery or  improved  processes  or  even  of  more  perfect  or- 
ganization, the  laboring  man  is  enahled  to  produce  more 
cheaply.  In  the  luiture  of  things  cheap  production  ulti- 
nuitely  necessitates  low  prices  atid  higher  wages.  ]t  is 
easily  seen  how  prices  must  he  lowered.  If  they  were  not, 
the  increased  product  could  iiot  he  sold.  It  nuiy  not  so 
easily  he  seen  that  higher  wages  are  also  a  necessary  result 
of  cheap  production,  hut  they  are.  '^^Fhc  chea])ening  of 
products,  that  is,  the  lowering  of  the  price,  means  an  in- 
crease in  their  consum])t ion,  eidarged  jjroduction,  more 
employment  for  lahor, — higlicr  wages.  Kven  if  it  he  granted 
tliat  the  increase  in  consumpti(Ui  is  not  exactly  in  pro- 
jiortion  to  the  c!iea])ening,  that  is.  even  although  cutting 
ihe  price  of  a  particular  article  in  two  does  not  double  the 
consumption  or  double  the  demand  for  labor,  the  increase 
is,  ncvci'thclos.  very  great,  and  sales  and  total  profits  are 
much  increased.  Morco\t'r  as  prochu'titui  increases,  the  em- 
])l()yer  obtains  move  money.  His  capital  is  augmented. 
Some  (d'  it  max  be  consunu'(l  or  wasted,  hut  an  increasinsf 
amonnt  l)econies  jiroductive  capital  seeking  investment. 
A<  this  amount  accumulates  it  starts  new  industries  and 
develops  resourc("s  theretofore  undeveloped;  and  the  result 
is  an  increased  ilemand  tor  workers  and  hi'dier  wa^es. 


142  The  Trusts 

A  typical  illustration  of  the  cheapening  of  a  product  while 
there  was  an  increase  in  work  and  wages,  as  a  result  of 
concentration  and  combination  and  enlargement  of  the  en- 
terprise, is  the  cotton  industry.  The  following  paragraph 
quoted  from  Geo.  Gunton  by  A.  Leo  AVeil  in  his  excellent 
])aper  before  the  Chicago  Trust  Conference,  summarizes 
some  statistics  collected  by  CJunton. 

"  If  it  is  true  that  the  concentration  of  capital  tends  to  diminish 
the  cost  of  production  and  intensify  competition,  it  follows  that 
prices  will  fall  or  wages  will  rise,  or  botli,  in  proportion  as  large 
enterprises  supplant  small  ones.  And  this  is  what  all  industrial 
history  shows  has  taken  place.  Take  for  example  the  cotton  in- 
dustry in  this  country.  In  1831  there  were  801  cotton  manu- 
facturing establishments  vvitli  an  average  capital  of  $50,702  each. 
.  .  .  The  ratio  of  consumption  of  cotton  cloth  to  population  was 
5.!)0  pounds  to  one  (that  is,  5.90  pounds  to  each  inhabitant),  and 
the  price  of  cotton  cloth  seventeen  cents  per  yard.  In  1880  the 
number  of  establishments  had  fallen  to  756.  The  average  amount 
of  capital  invested  in  establishments  had  risen  from  $50,702  to 
$275,503:  .  .  .  the  ratio  of  consumption  of  cotton  cloth  to  the 
population  was  13.91  pounds  to  one.  and  the  price  of  cotton  clotli 
A\  as  seven  cents  per  yard,  and  wages  were  eiglity  j)er  cent  higher. 
Comparing  1880  with  1831,  the  ca])ital  invested  per  spindle  was 
over  one-third  less,  the  number  of  spindles  operated  liy  each 
laborer  nearly  three  times  as  large,  the  pi-oduct  per  spindle  one- 
fourth  greater,  the  product  (in  quantity)  per  dollar  invested  twice 
as  large,  the  product  per  laborer  employed  nearly  four  times  as 
great,  the  price  of  cotton  cloth  sixty  ])er  cent  less,  wages  eighty 
j)(T  cent  higher,  and  the  consumption  of  cotton  cloth  ])er  capita  of 
tlie  jjopulation  over  one  hundred  per  cent  greater.  These  are  the 
results  of  the  process  of  consolidation  into  large  capitals,  extend- 
ing over  half  a  century.  What  is  true  of  this  industr}-  is  ecjually 
true  of  all  industries  in  pro])ortion  as  the  concentration  of  caj)ital 
has  increased." 

But  while  those  figures  show  that  from  an  enlarged 
product  tliere  come,  as  a  result,  cheaper  goods,  lower 
jjrices  and  higher  wages,  and  wliile  undoubtedly  this  cheap- 


Trusts  and  the  Wage-earner  143 

ening  of  product  could  have  hcon  occasioned  only  l)y  con- 
solidation and  by  dn  increase  in  tlie  size  of  factories,  yet 
have  we  sutlicient  j)roof  to  establish  the  jtroposition  that 
a  consolidation  of  all  the  cotton  mills  would  liave  neces- 
sarily resulted  in  the  same  way?  The  hgures  are  of  great 
importance  and  deserve  the  most  careful  study;  hut  in 
drawing  inferences  we  should  not  forget  that  despite  the 
consolidation  of  cotton  factories  and  their  increase  in 
capitalization,  there  were  in  1880,  seven  hundred  and  hfty- 
six  competitive  factories.  The  concentration  of  ca})ital  in 
the  cotton  industiy  nuide  possible  a  chea])er  cost;  but 
there  was  active  com]ietition,  in  this  case  at  least,  to  oc- 
casion lower  prices. 

It  must  be  remembered  that  the  cheapening  of  the  price 
of  numufactured  articles  means  chea])er  goods  for  the  pro- 
ducers themselves,  in  so  far  as  they  are  consumers  of  those 
goods.  If  the  cheapening  he  generally  extended  to  all 
classes  of  nu^nufactTirtnl  goods  (and  this,  as  a  rule,  has  oc- 
curred), an  actually  smaller  amount  of  wages  may  have  an 
increased  purchasing  power  and  therefore  be  relatively  an 
increase  of  wages.  Specialization  is  either  a  new  division 
of  human  labor,  or  the  adoption  of  new  and  improved  ma- 
chinery. In  whatever  way  it  manifests  itself,  it  a!w:'ys 
means  more  abun(hnit  ])roduction.  Xearly  all  products 
tend  to  grow  chea])er.  l)ecause  inventive  taleTit  is  continu- 
ally being  exhibited  in  so  many  industries.  Those  which 
have  the  least  tendency  to  grow  cheaper  are  those  in  the 
production  of  whieli  there  is  the  least  possibility  of  a  divi- 
sion of  lal)or  and  the  least  opportunity  to  use  machinery 
and  to  concentrate  and  combine,  viz.,  agricultural  prod- 
ucts. Indeed,  there  has  been,  of  late,  a  tendency  for  prices 
of  agricultural  products  to  increase.  The  report  of  the 
IT.  S.  Senate  Committee  which  investigated  prices  and 
wages  from  ISGd  to  1891,  and  which  considered  two  hun- 


144  ^^^^  Trusts 

dred  common  products,  manufactured  as  well  as  agricul- 
tural, found  that  wages  had  increased  G8  per  cent.  The 
prices  of  one  hundred  and  forty  manufactured  articles  had 
fallen  from  6  to  40  per  cent.  Fifty-eight  articles  had  in- 
creased in  price.  The  net  decrease  was  4  per  cent.  With 
one  or  two  exceptions  all  of  the  fifty-eight  products,  the 
prices  of  which  had  increased,  were  agricultural  or  raw 
material  products  in  which  concentration  of  capital  and  the 
use  of  machinery  had  l)een  very  sliglit.  By  moans  of  con- 
solidation, tlien,  and  concentration,  vrages  had  increased 
not  only  actually  and  absolutely  in  money  (GS  ])er  cent), 
but  more  than  that  in  their  ])urchasing  power. 

In  considering  the  iio.-sibility  of  an  increase  or  decrease 
in  wages,  one  should  ]iever  lose  sight  of  the  fundamental 
fact  that  the  source  of  wages,  the  fund  from  which  they 
are  payable,  is  the  product  turned  out  by  the  labor  that 
is  to  be  ])aid.  "We  do  not  mean  to  say  that  there  is  an 
absolutely  fixed  wage-fund.  That  is  an  exploded  fiction  of 
political  economy.  Wages  may  be  increased  by  compelling 
employers  to  take  a  smaller  share  of  profits,  and  allotting 
to  the  wage-earner  a  larger  share.  The  economics  of  the 
wage  question  cannot  1)0  separated  from  social  problems. 
American  workingmen  get  better  wages  than  European 
nations  kirgely  l)ecause  they  demand  them.  American 
public  sentiment  will  not  tolerate  any  degradation  of 
American  workmen.  Thu-  w(»  pass  laws  regulating  child 
and  female  labor;  and  providing  for  factory  inspection  and 
control.  ]>abor  unions  can  do  an  amazing  amount  to  in- 
crease wages  liy  raising  the  social  standards  of  the  masses. 
Workingmen  are  like  everyone  else  in  that  the  more  they 
get,  the  more  they  want.  If  Ave  once  have  worn  good 
clothes,  we  want  always  to  have  good  clothes  to  wear;  if 
we  have  accustomed  ourselves  to  a  certain  degree  of  civili- 
zation, we  will  never  give  it  up,  if  we  can  help  it.     Every 


Trusts  and  the  Wage-earner  145 

material  comfort  the  workingman  has,  creates  a  desire  for 
other  comforts.  Every  jjrivileije  tliat  he  acquires  is  an  in- 
centive to  demand  a  furtlier  privik'ge,  and  if  lie  uses  it 
proi)erly,  it  is  a  warrant  for  so  doing.  People  to-day  talk 
about  the  ''  uppishness ''  of  domestic  servant  girls  and  the 
demands  of  labor  unions.  These  demands  may  in  individ- 
ual cases  be  unreasonable,  but  all  our  strikes  and  labor 
troubles  are  the  growing  pains  of  an  enlarging  liberty  and 
a  moving  civilization.  AVell  may  we  lament  the  day  when 
the  workers  do  not  want  more  of  the  world's  comforts  and 
more  of  its  privileges.  Wages  increase  because  laborers 
are  determined  to  have  a  share  in  the  world's  prosperity. 
They  demand  not  the  right  of  existence,  but  the  right  as 
men  to  live, and  to  live  as  men, — a  life  of  industry,  but  also 
a  life  of  refinement,  of  comfort,  and  of  happiness; — a 
plenty  and  a  variety  to  eat,  clothing  suitable,  sufficient  and 
of  good  style;  leisure  for  recreation;  opportunity  for  edu- 
cation. 

Wages  may,  indeed,  be  increased  by  compelling  the  em- 
ployers to  accept  a  smaller  amount  of  profit,  but  the  most 
certain  and  sure  method  of  increasing  wages  is  to  increase 
the  product,  for  then  there  is  a  greater  fund  from  which 
compensation  can  be  drawn,  and  whatever  tends  to  increase 
the  product, — whetlier  it  be  a  machine,  a  process,  or  a  form 
of  business  organization,  tends  lo  increase  wages,  if  a 
l)i)(ly  of  laborers  make  a  thousand  pairs  of  shoes  a  day  and 
receive  a  certain  rate  of  wages  from  theii-  employer,  they 
in  etfect  receive  a  ])ortion  of  th(>  shoes  which  they  make. 
If,  by  means  of  a  better  organization,  they  can  double  that 
product,  while  undoubtedly  the  amoutit  of  tlieir  wages 
cannot  be  doubled  in  dollars  and  eents,  because  of  the  lower 
])rice  that  shoes  will  bring,  yet  it  is  certain  that  those 
wages  will  be  greatly  increasecL  If  under  the  first  con- 
dition they  receive  one-third  of  the  product  m  shoes,  or 


146  The  Trusts 

its  equivalent,  the  employer  can  equally  as  well  afford 
to  give  them  one-third  of  the  product  under  the  new  sys- 
tem of  organization;  that  is,  twice  as  many  shoes.  The 
laborer  in  the  shoe  factory  can  have  twice  as  much  to 
offer  as  he  had  before.  The  increase  in  the  number  of 
shoes  made  by  him  and  which  must  be  sold  will  make  an 
increase  in  the  productions  of  many  other  persons.  It  will 
cause  the  use  of  more  hides,  make  necessary  the  raising 
of  more  cattle,  give  employment  to  more  tanners  and 
leather  merchants,  and  renewed  activity  to  all  the  mantt- 
facturers  of  subsidiary  parts  of  shoes,  such  as  shoe  pegs, 
shoe  thread,  shoe  buttons,  and  dozens  of  other  articles  that 
enter  into  the  manufacture  of  shoes.  Thus  all  these  people 
will  have  the  means  of  getting  more  shoes,  but  they  will 
want  hundreds  of  other  articles  besides  shoes,  and  in  pro- 
portion as  their  means  to  give  something  in  exchange  have 
increased,  their  desires  or  demands  or  consumptive  powers 
will  have  increased,  and  these  consttmptive  powers  will  mean 
increased  activity  in  every  otlier  industry,  and  increased 
production.  The  product  will  be  divided  eventually  among 
the  producers.  The  laborer  in  the  shoe  factory  will  not 
need  twice  as  many  shoes,  but  he  will  be  able  to  exchange 
these  shoes  for  a  greater  amouiit  of  sugar  and  coffee  and 
flour  and  other  food  products,  and  for  more  clothing,  and 
for  a  greater  numlior  of  means  of  amusement  and  enter- 
tainment and  education,  than  lie  would  have  obtained  had 
he  and  his  fellow  workers  continued,  under  the  original 
method  of  organization,  to  have  made  only  the  thousand 
pairs  of  shoes. 

The  conclusion  of  the  whole  matter,  then,  is  tliis, — what- 
ever increases  the  amount  of  product  is  sure  eventually  lo 
increase  the  fund  fi'om  which  wages  can  be  ])aid:  and, 
without  an  exception,  history  sliows  that  in  the  distribution 
of  the  fund,  the  wage-earners  have  continuously  received 


Trusts  and  the  Wagc-carncr  147 

a  larger  and  larger  proportion,  l-lvery  invention,  every  dis- 
covery, every  [)rocess,  every  niaehine,  every  method  of  or- 
ganization whieli  eheapens  the  pi-odud,  stiuudates  the  de- 
mand for  it  and  inereases  the  amount  of  work  and  raises 
wages.  The  truth  that  stioutd  never  t)C  forejotten  t)i/  the  ivage- 
earner  is  that  tlie  amount  of  tiis  wages  ivltt  depend  not  so 
inurli  upon  the  nunit>er  of  eniptoi/ers,  as  upon  the  amount 
of  work  there  is  for  him  to  do.  If  there  arc  hundreds  of 
competitors  and  their  processes  of  production  are  c.vpensire, 
then  there  will  be  comparativeti]  tittle  icorl-.  If  there  are  onh/ 
a  feiv  competitors,  hut  if  those  few  can  produce  cheaply,  the 
anihunt  of  work  will  increase  and  wages  will  rise. 

We  must  never  lose  siglit  of  the  fact  that  the  increase 
in  tlie  denumd  which  gives  more  employment  and  higher 
wages  is  due  not  to  cheap  production,  hut  to  lower  prices. 
C'hea]j  ])roduction,  economical  production,  always  tends 
to  dis])lace  labor  and  to  throw  it  out  of  employment.  Jt  is 
lower  ])rices,  lower  relative  prices,  alone  that  can  in- 
crease the  demand  and  stimulate  production  and  in  this 
way  give  new  employment  and  keep  up  wages.  Again  we 
are  impressed  with  the  momentous,  yes,  awful  danger  of 
trusts,  if,  notwithstanding  their  ])ower  of  chea])  produc- 
tion, they  att<Mnpt  to  exercise  uionojjolistic  ])owers  and 
fail  to  lower  prices  in  accordance  with  the  cheapening 
of  production.  They  cannot  permanently  charge  undue 
])rices;  that  is  absolutely  certain.  Competition  is  sure 
sooner  or  later  to  arise  anci  cut  down  their  prices:  hut 
even  tem])orary  extortions,  ^hort  periods  of  over-charging, 
mean  diminished  consumption  and  "shut-downs,"  lack  of 
work,  low  wages,  strikes,  quickly  alternating  periods  of 
spasmodic  business,  periods  of  activity  followed  by  seasons 
of  depression,  stagiuition  and  liankruiitcy.  The  absolute 
importance,  then,  of  attemjiting  in  every  way  to  renun'O 
the  ob>tacles  in  the  way  of  fair  competition,  of  prohibit- 


148  The  Trusts 

ing  the  unfair  trust  methods  of  "  cut-throat "  competition 
in  certain  localities  while  over-charging  in  others,  of 
abolishing  all  special  privileges  to  trusts,  of  crushing  out 
every  trust  that  is  a  ^^raetical  monopoly, — should  never  be 
forgotten  by  the  wage-earners. 

On  the  other  hand,  to  abolish  entirely  every  large  in- 
dustrial organization  would  be  to  re-open  the  flood  gates  of 
excessive  comj)etition  and  to  expose  ourselves  again  to  all 
its  evils.  It  would  ])e  to  go  back  to  expensive  methods  of 
production,  which  would  lessen  the  demand  and  the  out- 
put, diminish  the  amount  of  labor  required,  close  up  many 
factories  and  mills,  cause  others  to  work  half-time,  neces- 
sitate paring  down  wages,  and  ])roduce  one  continued  era 
of  depression,  until  the  sane  and  sensible  method  of  adopt- 
ing all  cheap  means  of  ])roduction  and  distribution  was 
adopted.  It  would  reduce  tlie  United  States  to  the  indus- 
trial condition  of  Spain  and  Turkey  and  all  countries 
where  labor-saving  machinery  and  methods  are  not  adopt- 
ed. To-day  we  are  in  competition  with  European  coun- 
tries that  have  cheap  labor,  and  with  Asiatic  countries,  not- 
ably Japan,  that  have  still  cheaper  laljor.  Unless  we  adopt 
all  the  labor-saving  machinery,  all  the  newest  and  most 
improved  processes,  and  also  the  most  perfect  labor-saving 
and  clieap-producing  methods  of  organization,  we  shall  lose 
our  foreign  trade.  It  is  only  l)y  these  means,  which  Avill 
enable  tlie  thousands  of  American  workmen,  who  receive 
good  wages,  to  turn  out  as  miicli  as  the  larger  nu]nl.)er  of 
European  or  Asiatic  laborers  whose  aggregate  wages 
are  the  same,  that  we  can  hope  to  obtain  a  foreign  market. 
Granting  tliat  we  could  1)y  a  tariff  retain  the  home  market, 
■ — unless  we  adojjt  the  eht'a])est  means  of  production  we  are 
industrially  nnd  conimorcially  ruined,  because  the  capacity 
of  our  f;u-tnric>  i>  fur  in  excess  of  our  consumptive  powers. 
It  is  absolutely  necessary  that  we  stifle  every  trust  that  is 


Trusts  and  the  Wage-earner  149 

a  monopoly,  1)ii(  tlic  abolitioTi  of  every  prcat  industrial 
corporation  would  st'eni  to  l)e  a  bad  ])oliey.  Jie.u-ulation, 
rather  than  destruction,  of  corporations,  is  what  the  wage- 
earner  needs.  Particularly  is  it  to  the  interest  of  the  wage- 
earner  to  encourage  tl'.e  enactment  of  statutes  that  will 
require  t)r  j)roni()te  publicity  of  the  alfairs  of  corporations, 
— the  fullest  {niblicity  that  can  be  had  without  revealing 
matters  of  ])rivate  business.  J.et  the  world  know  that 
profits  are  uiululy  high  and  competition  will  eventually, 
in  all  likelihood,  assert  itself.  Prices  will  be  lowered  and 
production  increased  with  the  increased  demand.  Let  the 
world  know  that  prices  arc  high,  but  that  wages  are  low 
or  the  hours  or  conditions  of  labor  excessive,  and  the  evils 
will  at  once  be  corrected.  If  that  great  moral  force,  wliich, 
in  an  age  of  selfishness  and  of  laxity  of  morals,  is  still  ;:n 
irresistible  force,  does  not  assert  its  power,  either  in  ilfi- 
cient  factory  legislation,  in  laws  for  arbitration, and  in  oth  r 
statutes;  or  else  in  that  silent  but  effective  way  of  social 
ostracism,  which  even  in  business  is  powerful;  or  in  that 
form  of  business  boycotting  that  refuses  to  buy  of  those 
who  would  degrade  labor; — if  that  great  moral  force  does 
not  assert  its  powt'r,  competition,  at  least,  will  spring 
up  and  give  to  labor  greater  employment  and  remunerative 
and  fair  wages.  Evil  loves  darkness,  and  in  the  world  of 
wickedness  the  ignorance  of  the  intended  victim  is  the 
power  of  the  villain.  Let  wage-earners,  then,  see  that  that 
same  pul)licity  which  they  them>elves  court  is  required 
of  trusts. 

The  dangers  that  the  laboring  man  apprehends,  and  his 
fear  that  there  is  a  pos-ibility  of  the  lowering  of  wages 
bv  trusts,  are  not,  however,  eon  lined  to  his  belief  that  the 
trust  is  a  monopolistic  power  that  can  ai'bitrarily  reduce 
wages,  lie  al.-o  f(>ars  thai  the  eeonomies  of  the  trust  per- 
mitting and  even  necessitating  the  discharge  of  many  labor- 


150  The  Trusts 

or<  in  every  industry,  mean  that  there  will  be  great  num- 
bers of  unemployed,  and  that  this  will  mean  a  lowering  cf 
wages.  In  the  chapter  on  Displaced  Labor  we  will  con- 
sider this  point  at  greater  length;  but  it  has  been  impossi- 
ble to  treat  of  the  subject  of  the  arbitrary  power  of  trusts 
to  reduce  wages,  without  touching  upon  it. 

Incidental  to  the  question  of  wages,  and  of  vital  interest 
to  the  workingmen  in  considering  laws  affecting  trusts 
and  combinations,  is  the  fact  that  the  trust  method  of  or- 
ganization of  capital  has  the  same  purpose  and  is  based 
on  the  same  principle  as  labor  unions  themselves.  The 
trust  is  formed  to  escape  the  evils  of  undue  competi- 
tion; the  union  is  organized  because  the  American  laborer 
does  not  want  to  be  compelled  to  sell  his  labor  at  the 
price  of  the  cheap  pauper  labor  of  Europe,  or  of  the 
'•'  yellow  labor ''  of  the  Orient,  or  even  at  the  price  of  the 
laborer  who  is  willing  to  toil  for  wages  that  merely  give 
sustenance  and  which  do  not  permit  him  to  enjoy  any  of 
the  comforts  of  American  civilization.  The  labor  union  is 
a  labor  trust  by  the  common  law,  and  by  the  decisions 
of  many  of  our  courts  it  has  been  declared  illegal  as  a 
combination  in  restraint  of  trade.  As  a  matter  of  fact,  the 
laws  designed  to  prevent  trusts  have,  as  a  rule,  been  ap- 
])lied  and  enforced  only  against  labor  organizations;  but  a 
growing  public  sentiment  is  compelled  to  admit  that  only 
by  elTective  organization  and  by  united  action  can  the 
laboring  man  raise  himself  up  to  his  proper  place  in  the 
conmninity.  If  workmen  were  forbidden  to  organize,  if 
each  one  was  obliged  individually  to  agree  with  the  em- 
ployer as  to  the  hours  of  work  or  rates  of  wages,  the  work- 
men of  tlio  cnuiUrv  would  become  practically  slaves.  Their 
nece.-.-iiic-  would  compel  ihem  to  accept  whatever  was  of- 
fered a>  wagf.'s.  Such  a  condition  of  affairs  wordd  not  only 
be  di;ba:-ii)g  to  the  workmen,  but  to  all  society.     We  can- 


Trusts  and  the  Wage-earner  151 

nor  al)(1li^l^  labor  unions  by  statute.  ^Fodcrn  enliirbton- 
luent  would  never  permit  such  an  attempt.  It  reeo^i^'nizes 
unions  as  necessities.  If  necessities,  they  must  be  allowed 
to  become  eireetive.  They  must  be  permitted  to  become 
equally  powerful  with  the  employers.  If  the  latter  com- 
bine and  consolidate  and  a<rree  on  the  scale  of  wages  that 
they  will  pay,  the  workmen  must  be  permitted  to  combine 
and  federate  and  anuilgamatc  and  agree  on  what  they  will 
take  as  wages.  Society  will  not  tolerate  a  law  declaring 
labor  unions  to  lie  conspiracies.  Yet,  so  far,  it  has  been 
lound  im])ossible,  consistentl}',  to  jirohibit  the  trusts  or 
unions  of  capital,  and  to  permit  the  unions  of  laljor;  and, 
as  has  been  said,  when  it  has  come  to  the  enforcement  of 
laws  against  combinations,  it  has  been  the  labor  unions 
rather  than  the  great  corporations  which  have  sulferc.'l.  All 
the  radical  statutes  that  so  far  have  been  passed  looking 
t(~)  the  absolute  abolition  of  trusts  have  borne  more  griev- 
ously u|)on  the  worknu'ii  than  the  caj)italists.  The  rea- 
son for  this  has  been,  not  so  much  a  desire  on  the  part  of 
the  courts  to  oppress  the  workmen  or  to  favor  capital, — 
for  judges,  like  all  other  persons  who  have  to  appeal  for 
popidar  support,  prefer  not  to  antagonize  the  masses, — but 
because,  although  the  principle  and  the  purpose  of  the  un- 
ion and  the  trust  are  the  same,  the  trust,  that  is,  associated 
capital,  is  enabled  by  means  of  the  corporation  to  become, 
TU)t  a  combination,  but  a.  unity.  The  wage-earners  may 
well  rake  heed  that  they  are  not  carried  away  by  the  clamor 
for  the  enactment  of  laws  that  will  prevent  all  combina- 
tions. If  they  heedlessly  do  so.  then,  like  Hanuin  in  the 
storv  of  Ksthei'.  they  may  ho  building  a  gallows  on  which 
they  tliernsidve<  will  bo  Jianged:  tliey  may  be  sharpening'  a 
sword  for  their  own  execution:  tliey  may  be  building 
a  !-h-ankcm-tein  that  will  crush  its  creator;  they  may  1)G 
Jiurlinir  a   boomerang:  which  will  come  back  to  hit  them 


152  The  Trusts 

liard  and  to  hit  them  often.  It  will  be  well  for  workmen, 
who  are  nrged  to  destroy  combinations  of  all  sorts  and 
sizes,  to  bear  in  mind  the  language  of  Mr.  Garland,  the 
ex-President  of  the  Amalgamated  Association  of  Iron  and 
Steel  AVorkers,  in  his  address  at  the  Chicago  Trust  Con- 
ference: 

"  The  working  people  are  appealed  to  in  almost  every  state  to 
urge  the  passage  of  some  pet  measure  of  certain  representatives 
to  law-making  bodies,  which  proposes  to  crush  out  trusts  and 
combinations.  While  it  may  be  that  labor  unions  do  not  possess 
the  skill,  cunning  and  capability  of  trusts  to  defeat  the  aim  of 
the  enactment,  it  is  certain  tliat  in  the  application  of  such  legis- 
lation, the  final  and  only  target  has  been  the  labor  union.  The 
record  of  neither  state  legislatures  nor  National  Congress  ever 
contained  one  breath  of  intimation  that  tlie  anti-trust  restrictions 
of  combinations  or  the  interstate  commerce  laws  passed  by  these, 
could,  in  the  least,  interfere  with  the  free  and  full  exercise  of 
tlie  right  of  workmen  to  organize.  Yet  I  make  the  assertion, 
without  fear  of  successful  refutation,  that  every  one  of  these  laws 
that  have  been  passed  upon  and  found  constitutional  by  the  courts, 
has  been  found  to  apply  to  organizations  of  labor;  and  that  every 
such  law  now  on  the  statute  books  will  be  so  construed,  not  ex- 
cepting the  much-mooted  law  of  Texas  or  the  one  that  came  from 
Arkansas;  and  if  either  or  both  of  them  became  federal  enact- 
ments there  would  not  be  one  small  cluck  left  in  the  workman's 
eagle  that  has  soared  so  valiantly  through  this  hall  for  the  past 
two  days." 

Many  of  the  anti-trust  statutes  have  expressly  excepted 
labor  unions  from  their  provisions.  The  bill  recently 
passed  Ijy  the  House  of  Representatives,  aniending  the 
Sliertnau  Anti-Trust  Act  of  1890,  contained  such  an  excep- 
tion. P)ut  in  all  probability  it  is  unavailing.  Similar  ex- 
ceptions in  state  laws,  relating  to  labor  unions  and  to 
combinations  of  farmers,  have  been  declared  imconstitu- 
tional. 

At  the  Chicago  Trust  Conference  care  was  taken  to  give 
due  consideration  to  this  important  question,  and  a  very 


Trusts  and  the  Wage-earner  153 

able  paper  was  read  l)y  a  member  of  the  Illinois  bar,  Mr. 
William  II.  Tutile.  The  laboring-man  and  all  his  friends, 
real  as  well  as  reputed,  may  properly  give  consideration  to 
these  extracts  from  this  paper. 

"  The  Iof,'islator  who  wonhl  reguhite  trusts  and  at  the  same 
time  not  embarrass  trades  unions,  should  understand  the  dis- 
tinction, or  hick  of  distinction,  so  far  as  the  policy  of  the  law  is 
concerned  between  combinations  of  capital  and  combinations  of 
labor.  If  the  two  are  so  closely  allied  in  principle  as  to  be  sepa- 
rated with  difliculty,  every  one  interested  should  understand  the 
matter,  and  be  prepared  to  meet  the  diiliculty,  otherwise  many 
radical  measures,  intended  to  root  up  tlie  tares  in  the  industrial 
field,  will  pluck  up  the  wheat  also.  Striking  examples  of  this 
have  occurred,  leading  to  unjust  criticism  of  our  judiciary  and 
executive  otilcers,  because  laws  that  were  aimed  at  one  class  in 
industrial  life,  hit  anotiier  class  as  well,  and  perhaps  hit  the  other 
class  first.  We  will  take  time  to  mention  one  illustration.  In 
1890  a  law  was  passed  by  Congress,  entitled  '  An  act  to  protect 
trade  and  commerce  against  unlawful  restrictions  and  monopolies.' 
It  provided  that  '  every  contract,  combination  in  form  of  trust  or 
otherwise,  or  conspiracy  in  restraint  of  trade  or  commerce,  among 
the  several  states  or  with  foreign  nations,  is  hereby  declared  to 
be  illegal.'  The  law  was  unquestionably  aimed  at  railroads  and 
monopolies,  and  intended  to  relieve  the  middle  classes  and  labor- 
ing men.  The  laboring  man,  however,  was  the  first  to  be  afi'ected 
by  it;  and  it  has  even  been  so  far-reaching  as  to  make  the  railroad 
strike  illegal,  which  subject  we  will  discuss  more  at  length  here- 
after. It  can  readily  be  seen  that  unless  we  understand  the  situa- 
tion our  somewhat  frenzied  demand  for  radical  legislation  to  lielp 
tlie  laboring  man,  may  cause  him  to  pray  for  deliverance  from  his 
would-be  friends. 

'■  It  may  be  safely  stated  as  a  general  proposition,  that  the 
policy  of  the  law  recognizes  no  distinction  between  capital  and 
labor  in  requiring  freedom  of  competition.  This  was  the  rule  of 
the  English  common  law  without  exception,  and  is  the  rule  of 
the  present  common  law  made  u{>  of  decisions  based  upon  princi- 
])les  of  ])ublic  policy.  In  recent  years,  however,  cert;iin  distinc- 
tions have  been  attempted  by  stiitutc  law,  which  we  will  notice 
later.     A   leading   case,   State   cv.   Stewart,   speaks   in   common   of 


154  ^^^  Trusts 

labor  and  capital  as  follows:  'The  principle  upon  which  the 
cases,  both  English  and  American,  proceed,  is  that  every  man  has 
the  right  to  employ  his  talent,  industry  and  capital  as  he  pleases, 
free  from  the  dictation  of  others;  and  if  two  or  more  persons  com- 
bine to  coerce  his  choice  in  this  behalf,  it  is  criminal  conspiracy. 
The  labor  and  skill  of  the  workman,  be  it  of  high  or  low  degree, 
the  plant  of  the  manufacturer,  the  equipment  of  the  farmer,  the 
investments  of  commerce,  are  all  in  equal  sense  property.  If  men 
by  overt  acts  of  violence  destroy  either,  they  are  guilty  of  crime.' 
Mr.  Tiedman,  in  his  text-book  on  Commercial  Paper,  says:  'All 
combinations  of  capitiilists,  or  of  workmen,  for  the  purpose  of  in- 
fluencing trade  in  their  special  favor  by  raising  or  reducing  prices, 
are  so  far  illegal  that  agreements  to  combine  cannot  be  enforced 
by  the  courts.'  In  the  case  of  Doremus  vs.  Hennessy,  recently  de- 
cided by  the  Illinois  Supreme  Court,  tliis  general  language  was 
used:  '  Xo  persons,  individually  or  by  combination,  have  the  right 
to  directly  or  indirectly  interfere  with  or  disturb  another  in  his 
lawful  business  or  occupation,  or  to  threaten  to  do  so  for  the  sake 
of  compelling  him  to  do  some  act,  which,  in  his  judgment,  his  own 
interest  does  not  require.'  Those  decisions,  with  many  others,  in- 
dicate that  in  tlie  field  of  industry,  capital  and  labor  are  partners 
of  equal  importance,  endowed  with  the  same  privileges  and  sub- 
ject to  the  same  restrictions." 

However  much  we  may  regret  the  recognition  of  these 
principles  of  law,  and  however  much  they  may  be  opposed 
to  a  growing  and  eniiglitened  sympathetic  public  senti- 
ment, the  experience  of  the  laboring  men  in  the  case  of  the 
strike  of  the  American  Railway  Union,  conducted  by 
luiirone  V.  Del3s,  should  show  that  the  proper  course  of 
]u-()ce(lurc  is  for  the  workmen  not  to  urge  the  adoption 
of  laws  against  combinations  until,  indeed,  some  distinc- 
tion is  recognized  between  combinations  of  labor  and  com- 
l>inati()ns  of  capital;  and  it  is  doubtful  whether  any  such 
distinction  in  principle  exists.  In  his  able  paper  Mr.  Tuttle 
says  that  althnugli  thirty  states  have  passed  anti-trust  laws, 
so  far  neither  ('ai)ital  nor  labor  has  been  affected,  for  the 
rea?^on  tliat  there  has  l)ecn  no  earnest  effort  to  enforce 


Trusts  and  the  Wage-earner  155 

tliom;  but  he  show?,  upon  an  examination  of  the  statutes 
of  these  several  states,  that  all  of  them,  if  given  a  natural 
construction  consistent  with  their  terms,  would  be  as  op- 
pressive to  labor  as  to  capital;  and  this  is  equally  as  true 
of  the  old  law  of  Texas  (188!))  and  the  law  of  Kansas,  as  of 
llie  anli-trust  laws  of  ^Missouri,  Xebraska,  Xew  Mexico, 
].,ouisiaiia,  Xew  York,  Indiana,  Georgia,  Arkansas,  or  any 
other  state. 

In  some  of  the  anti-trust  laws,  as  in  those  of  Illinois, 
Arkansas,  Georgia,  and  Indiana,  labor  unions  are  specifi- 
cally excluded  from  their  operation,  but  a  decision  of  the 
I'nitcd  States  Circuit  Court  in  the  north  division  of 
Texas  in  181)7,  decided  that  the  Texas  anti-trust  law  of 
1880  was  unconstitutional  as  class  legislation,  because 
among  other  things  it  excepted  from  its  provisions,  restric- 
tions of  competition  in  agricultural  products  or  live  stock 
while  in  the  hands  of  the  producer  or  raiser.  Consistency 
would  seem  to  require  a  construction  to  the  effect  that  an 
excm])tion  of  labor  unions  from  the  provisions  of  the 
statute  was  also  class  legislation  and  therefore  void. 

"We  do  not  wish  to  be  understood  as  maintaining  that 
tlicrc  is  no  distinction  between  labor  unions  and  trusts, 
for  we  til  ink  there  is  one  of  vital  importance.  Both  are 
formed  because  of  tlie  desire  to  eliminate  a  detrimental 
cnmpotition;  but  they  (litfor  in  tliis  important  respect,  that 
tb(^  labor  uni(m  admits  to  its  membership  all  the  workers 
in  a  ]iailicular  industry;  none  tiave  s]ieeia!  privileges;  and 
it  has  Ix^on  well  said  tliat  the  union  represents  the  move- 
ment o['  tb.e  ninss  of  tlie  people  for  economic  justice  and 
social  advantage".  P)Ut  the  wago-earnor  must  never  forget 
that  in  the  eve  of  the  law,  and  aceordintr  to  the  declara- 
tions of  manv  of  tiie  courts,  th(T('  is  no  distinction  between 
combinations  of  labor  and  combinations  of  capital. 


CHAPTER  VIII. 

TRUSTS    AND    DISPLACED    LABOR. 

The  man  who  makes  two  blades  of  grass  grow  where  one 
formerly  grew  has  been  declared  a  world's  benefactor. 
Much  greater,  then,  ought  to  be  the  encomium  pronounced 
upon  the  person  who,  by  perfecting  a  tool,  inventing  a  ma- 
chine, or  organizing  industry,  causes  one  man  in  a  given 
time  and  with  a  given  amount  of  labor  to  do  the  work 
which  formerly  required  two  men;  for  the  community  at 
large  can  have,  as  the  result,  twice  as  much  of  that  product, 
or  else  it  can  have  something  else  that  one  of  the  two 
men  can  produce.  To  the  community,  the  saving — es- 
pecially when  considered  only  abstractly — seems  an  advan- 
tage. "  Why,"  says  it,  "  should  two  men  be  paid  when 
one  can  do  the  work?"  Sometimes  there  is  another 
thought  which  comes  to  the  community:  "  Is  it  really  a 
good  thing  for  us,  the  community,  that  the  second  man 
should  lose  his  employment?"  "He  is  out  of  employ- 
ment, and  it  seems  as  if  he  never  could  again  get  work." 
In  time  the  community  learns  that  all  the  displaced  em- 
ployees have  found  employment  again,  either  in  the  same 
industry  or  in  some  other;  and  the  community  sees  that  it 
is,  in  fact,  good;  that  it  is  inevitable.  The  thought  that 
comes  second,  if  at  all,  to  the  community,  is,  however,  the 
first  thought  of  the  displaced  employee;  namely,  the  hard- 
ship suffered  by  him.  This  displacement  of  labor  is  the 
inevitable  incident  of  labor-saving  machinery  and  labor- 

156 


Trusts  and  Displaced  Labor  157 

saving  organizations.  It  is  the  absolutely  necessary  ac- 
companiment of  industrial  progress.  There  is  no  advance 
without  someone  or  something  being  displaced  in  the  move- 
ment. This  is  as  true  of  industrial  progress  as  of  physical. 
The  more  rapid  the  progress  the  more  sudden  the  displace- 
ment. The  extent  of  the  displacement  is,  indeed,  the  real 
measure  of  the  progress — the  saving,  the  benefit.  The  dis« 
placement  of  labor  is  one  of  the  most  pitiable  of  all  the  at- 
tendant evils  of  industrial  progress  because  it  is  generally 
the  most  skilled  that  are  displaced.  The  more  one  has 
specialized,  the  more  it  is  likely  a  machine  will  be  invented 
to  do  his  work,  and  the  more  it  is  difficult  for  him  to  find 
work  in  some  other  industry. 

Every  labor-saving  device,  whether  it  has  been  an  inven- 
tion of  machinery  or  a  betterment  in  organization,  has  been 
fiercely  opposed  by  those  who  were  about  to  be  displaced. 
The  history  of  industrial  progress  is  a  record  of  hostility 
and  opposition  to  improvements,  inventions  and  innova- 
tions. Manual  labor  has  always  been  the  enemy  of  the  new 
machine.  Arkwright  and  Hargreaves  and  Crompton  were 
mobbed  by  the  hand-weavers,  and  in  the  latter  half  of  the 
eighteenth  century  mobs  went  through  England  breaking 
down  power-machines.  The  introduction  of  nearly  every 
new  machine  has  been  fiercely  resisted  and  loudly  lamented. 
One  need  not  wonder  at  the  opposition  of  the  laborers.  No 
man  loves  that  which  takes  the  bread  out  of  his  mouth  and 
the  mouths  of  those  whom  he  loves  and  whom  he  must 
feed;  and  this  is  what  the  machine  appears  to  do, 
and  for  a  time  does  do.  But  it  would  be  better  for 
the  laboring  man  if  he  formulated,  in  some  way, 
his  claim  upon  the  community  for  the  loss  he  has 
suffered,  and  made  a  reasonable  demand  that  the  com- 
munity, out  of  the  great  saving  accruing  to  it  and  to  the 
introducer  of  the  machine,  would  pay  something  to  the 


158  The  Trusts 

skilled  laborer  whose  skill  has  been  rendered  useless,  and  t© 
the  faithful  employee  for  whom  there  is  no  longer  work. 
It  might  be  possible  for  the  community  by  some  plan  to 
assuage  in  some  degree  the  suffering  occasioned  to  the  in- 
dividual by  these  new  methods.  The  community  ought 
not  to  overlook  the  great  wrong  done  to  the  displaced. 
They  are  the  victims  over  whom  the  chariot  of  progress 
ruthlessly  rides — the  victims  of  industrial  campaigns.  Wo 
pension  our  soldiers  in  war.  Can  we  pension  the  injured 
veterans  of  industry?  Xo  scheme  has  ever  been  devised 
to  compensate  workmen  displaced  by  machinery  or  by  im- 
proved methods  of  organization;  probably  no  scheme  can 
be  devised;  but  this  much  is  certain:  the  most  senseless 
proposition  would  be  to  prevent  the  introduction  of  im- 
proved machinery  or  better  organization.  It  would  be 
infinitely  cheaper  for  society  to  pension  displaced  em- 
ployees— to  pay  them  for  all  their  lives  the  wages  they  have 
been  receiving,  for  this,  at  the  most,  would  only  delay  prog- 
ress one  generation.  Perhaps  there  is  no  other  course  than 
for  the  displaced  laborer  to  adapt  himself  as  readily  as  pos- 
sible to  the  new  condition.  Perhaps  there  is  no  way  of  re- 
lieving the  hardship  of  the  displaced  man.  But,  however 
practicable  or  impracticable  any  scheme  of  relief,  the  march 
of  progress  cannot  be  stopped.  Labor-saving  devices  and 
labor-saving  organizations  will  be  adopted  because  tbcy  are 
a  benefit  to  the  community  aud  eventually  to  all  classes  and 
industries; — because  they  are  the  greatest  good  for  the 
greatest  number,  and  finally  the  greatest  good  to  all. 

Trusts  do,  indeed,  close  many  factories  and  mills,  and 
throw,  temporarily  at  least,  many  men  out  of  employ- 
ment. Tlioy  would  not  be  clieaj)  producers  if  they  did  not. 
Tiiey  are  labor-saving  organizations.  Their  real  econo- 
mies grow  out  of  the  fact  that  tiie  same  work,  by  means  of 
great  centralization,  can  be  done  by  fewer  men.      Little 


Trusts  and  Displaced  Labor  159 

shops  which  cannot  produce  cheaply  are  necessarily  closed, 
either  because  they  cannot  compete  against  the  trust,  or 
because  if  absorbed  by  it  they  cannot  be  run  economically 
and  profitably.  The  men  who  were  employed  in  them  are 
for  this  reason  no  longer  needed  and  are  therefore  dis- 
charged. Thus  when  the  cotton-oil  trust  was  founded,  it 
closed  more  than  a  dozen  small  old-fashioned  mills.  The 
whisky  trust,  immediately  after  its  formation,  closed  sixty- 
eight  of  its  eighty  distilleries,  but  with  its  remaining  twelve 
it  was  able  to  furnish  the  same  output  as  before,  and  soon 
to  increase  it  largely.  The  sugar  trust,  it  is  said  by  Ernst 
Von  Halle,  can  supply  the  entire  market  with  the  product 
of  one-fourth  of  the  plants  which  it  has  absorbed.  To 
oppose  the  closing  up  of  these  unnecessary  plants  would  be 
the  height  of  folly.  If  the  community  had  a  right, 
directly  or  indirectly,  to  compel  the  whisky  trust  to  keep 
on  running  the  sixty-eight  distilleries  that  it  closed,  in 
order  that  the  men  who  were  employed  in  them  might  not 
be  thrown  out  of  work,  and  in  order  that  the  towns 
and  cities  in  which  they  were  situated  might  not  lose 
business  industries,  why  not  insist  that  the  whisky 
trust  should  increase  its  distilleries  from  eighty  to 
three  hundred  or  to  five  hundred,  in  order  to  give  more 
work,  and  more  industries  to  more  towns?  The  truth  is 
that  the  industries  that  were  closed  were  unnecded;  that  the 
services  of  the  men  w1io  were  discharged  were  not  required. 
The  further  truth,  which  is  the  important  truth,  is  that 
every  cent  that  is  paid  for  these  unnecessary  services,  or  to 
maintain  these  unneeded  plants,  is  a  burden  which  is  finally 
borne  by  the  consumer.  Its  voluntary  continuance  would 
be  folly.  To  eoni]iel  its  continuance  would  be  a  crime. 
\Yhen  one  laments  the  closing  of  factories  and  mills  1)y 
trusts,  he  should,  however,  never  lose  sight  of  the  fact  that 
under   the   competitive   system   men   are   very   frequently 


i6o  The  Trusts 

being  thrown  out  of  work.  Factories  and  mills  are  con- 
stantly being  closed.  Commercial  travelers  are  every  now 
and  then  losing  their  places.  If  the  reports  of  the  com- 
mercial agencies,  which  show  that  eighty  per  cent  of  busi- 
ness men  fail  at  some  time  or  other  during  their  business 
careers  are  correct,  then  it  is  certain  that  at  some  time  or 
other  a  large  portion  of  the  factories  and  mills  of  the  coun- 
try are  closed  and  a  majority  of  the  employees  are  thrown 
out  of  work. 

It  is  the  belief  of  disinterested  students  and  observers 
that  without  the  formation  of  trusts,  the  small  and  weak 
industrial  establishments  would  have  been  forced  by  com- 
petition to  have  suspended,  and  that  even  a  greater  num- 
ber of  plants  would  have  been  closed,  and  a  larger  number 
of  men  thrown  out  of  employment.  Absorption  by  the 
trust  has  enabled  the  trust  with  its  various  economies  to 
save  the  proprietors  from  ruin,  if  not  to  give  employment 
to  all  the  Avorkmen.  Ernst  Yon  Halle  states,  as  his  opinion, 
that  even  if  no  whisky  trust  had  been  formed,  the  natural 
conditions  of  production,  such  as  the  price  of  real  estate, 
of  wages  and  of  grain,  and  the  rates  of  transportation, 
w^ould  have  given  to  the  distilleries  situated  in  Peoria,  111., 
such  an  advantage  that  most  of  the  distilleries  in  other 
places  would  in  the  course  of  time  have  been  obliged  by  the 
force  of  competition  to  go  out  of  business;  that  the  sugar 
refineries  of  Havemcyer  and  Spreckels  were  so  much 
better  equipped  than  those  of  their  competitors,  and  their 
owners  had  the  possession  of  so  many  valuable  patents, 
and  by  reason  of  them  and  by  reason  of  pos- 
sessing great  capital  and  experience,  were  enabled  to  pro- 
duce so  much  more  cheaply  than  their  competitors  thai 
they  were  bound  in  the  course  of  time  to  acquire  nearly  all 
the  trade,  and  their  competitors  in  all  probability  were 
destined  to  bankruptcy  and  failure;    that  long  before  the 


Trusts  and  Displaced  Labor  i6i 

Carnegie  Co.  was  formed  in  this  year,  1900,  Mr.  Carnegie,  by 
reason  of  his  capital  and  ability,  was  so  much  stronger  than 
all  his  competitors  that  they,  for  their  own  protection  and 
preservation,  entered  into  pools  with  him;  that,if  it  be  urged 
that  the  terms  and  conditions  of  these  pools  were  oppres- 
sive to  the  smaller  concerns  in  them,  it  is  but  additional 
proof  that  the  owners  of  these  smaller  concerns  were  so 
afraid  of  bankruptcy  and  ruin  that,  even  upon  unfair  terms, 
they  were  willing  to  enter  the  pools  in  order  to  be  able  to 
continue  business  at  all. 

One  class  of  persons  greatly  affected  by  trusts  is  that 
known  as  "  commercial  travelers."  Competition  among 
sellers  for  many  years  mightily  increased  the  number  of 
commercial  travelers.  The  more  intense  that  competition 
becomes,  the  greater  is  the  need  of  the  services  of  this 
class  to  "  drum  "  up  trade,  to  exhibit  the  "  line  carried," 
to  customers.  The  commercial  travelers  are  among 
the  most  active,  aggressive,  and  public-spirited  of  Ameri- 
can business  men.  The  success  of  competing  estab- 
lishments depends  very  largely  upon  these  represent- 
atives. They  make  the  fortune  of  many  a  mercantile 
house.  Each  one  has  his  "  trade," — a  good  will  which' 
is  most  valuable.  Naturally,  commercial  travelers,  are 
not,  as  a  rule,  low-priced  men.  Their  salaries  and  their 
expenses  constitute  a  very  large  percentage  of  the  cost  of 
business;  they  are  one  of  the  largest  items  that  go  to  make 
up  the  cost  price  to  the  retailers.  As  soon  as  all  the  com- 
peting industries  are  formed  into  one  combination  there  is 
no  longer  the  necessity  to  solicit  trade  to  the  same  extent, 
and  the  commercial  traveler  becomes  needless.  He  is 
dropped.  To  just  the  extent  that  the  trust  can  dispense 
with  his  services  does  it  effect  a  saving.  The  greater  the 
number  of  men  whose  services  are  dispensed  with,  the  larger 
the  saving.     Mr.  P.  E.  Dowe,  president  of  the  Commercial 


1 62  The  Trusts 

Travelers'  Xational  League,  has  strongly  arrayed  liiraself 
against  trusts.  He  shows  how  co:iiinercial  travelers  have 
lost  their  places  owing  to  trusts.  In  a  speech  at  the  Chi- 
cago Trust  Conference  in  September,  1899,  he  spoke  as 
follows  : 

"  There  have  been  thirty-five  thousand  commercial  travelers 
thrown  out  of  employment,  mostly  traveling  salesmen,  but  in  part 
city  salesmen  who  come  under  the  title  of  commercial  travelers; 
for  the  man  who  picks  up  his  gripsack  and  drums  city  trade,  or 
invites  customers  to  his  headquarters  to  inspect  his  samples,  is  a 
commercial  salesman,  or  a  commercial  traveler,  by  a  slight  elas- 
ticity in  the  use  of  the  name.  A  city  salesman  is  eligible  to 
membership  in  any  of  the  commercial  travelers'  associations.  The 
majority  of  city  commercial  salesmen  make  out-of-town  trips  occa- 
sionally, sometimes  short  distance,  sometimes  long  distance  jour- 
neys. I  neglected  to  note  in  previous  arguments  this  subclassifica- 
tion;  it  is  unimportant,  however,  as  the  city  men  are  but  a  small 
proportion  of  the  whole  number  affected. 

"  I  stated  in  Washington  in  June  last  that  twenty-five  thou- 
sand were  reduced  in  salaries.  Could  add  to-day  a  thousand  to 
these  figures.  I  was  in  error  when  I  anticipated,  on  the  16th  of 
June,  that  thousands  more  of  the  commercial  travelers  would  be 
dispensed  with  on  July  1st;  for,  from  reasons  best  known  to  the 
trust  ofTicials,  expected  wholesale  discharges  did  not  take  place. 
I  have  heard  from  less  than  one  hundred  discharged  on  that  date, 
but  have  lx.'en  notified  of  many  cases  of  reduced  salary.  Ileduc- 
tion  in  salaries  was  not  exclusively  with  trusts;  many  of  the 
'  outsiders,'  owing  to  the  pressure  of  unfair  competition  and  loss 
of  trade,  were  obliged  to  make  reductions. 

"  The  salesmen  who  lost  positions,  owing  to  the  trusts,  were  all 
good  men;  being  of  the  energetic  and  progressive  character  jjro- 
vcrbiiil  to  the  American.  They  could  not  be  discovered  as  tramp- 
ing llic  streets  wearing  signs  of  distress.  Nearly  every  one  of  them 
had  some  money  saved;  some  found  positions  as  travelers  for 
other  hduses;  some  went  into  other  pursuits;  some  had  farms, 
and  1  know  of  more  than  forty  instances  where  former  drummerr. 
are  doing  farm  work;    and  some  are  still  looking  for  positions." 

^Ir.  Duwe's  statements  contain  some  significant  admis- 


Trusts  and  Displaced  Labor  i6 


o 


sions;  and  it  may  be  questioned — in  fact,  by  the  most  emi- 
nent authority  it  has  been  ({uesiioned — whether  his  figures 
are  reliable.  They  have  been  obtained,  as  he  himself  ad- 
nuts,  largely  by  means  of  correspondence  and  verbal  re- 
ports, sometimes  direct  and  sometimes  round-about.  They 
are  really  little  more  than  rumors.  They  seem  t(j  be  about 
as  erroneous  as  were  his  anticipations  of  the  IGth  of  June. 
But  conceding  that  thirty-live  thousand  commercial  travel- 
ers have  lost  their  places,  what  is  the  conclusion  that  is  to 
be  drawn?  It  is  that  trust  methods  have  at  least  saved 
the  salaries  and  expenses  of  thirty-five  thousand  commer- 
cial travelers;  that  to  that  extent  production  has  been  made 
cheaper  and  lower  prices  rendered  possible,  while  the  en- 
ergy and  force  that  are  characteristic  of  these  commercial 
travelers  can  now  be  directed  into  some  u-(;ful  channel 
through  which  they  can  render  needed  services  to  the 
world. 

It  is  unquestionable  that  trusts  displace  labor.  If  they 
did  not  render  some  services  useless,  they  would  have  no 
advantage.  But  trusts  would  not  have  a  suilicient  reason 
for  being,  even  if  they  could  dispense  with  lal)or,  if  the 
displaced  laborers  were  to  remain  permanently  idle.  Xo 
calamity  would  be  greater  than  to  liave  tht'se  thirty- five 
thousand  alert,  ])rogressive,  active  Am«_M-icans  reduced  to 
id'cness.  But  they  will  not  remain  idle.  They  will  ob- 
tain situations.  It  may  ])e  difliculi  foi'  tliem  to  do  so 
at  once.  In  many  cases  the  new  ]io-ilioiis  may  not  l)e  to 
their  liking:  but  somewhere  or  other,  in  the  great  field  of 
industry,  there  will  be  ocPU])ations  and  work  for  them. 
And,  however  little  all  their  experience  and  skill  as  com- 
mercial travelers  will  be  availed  of.  doubtless,  in  general, 
the  community  will  be  ])etter  served  by  their  efforts  in 
these  new  ])laces  of  enijiloynient  tlian  in  the  useless 
service   of  soliciting  trade   for  producers  who   have   com- 


164  The  Trusts 

bined.  Wherever  machinery  has  been  introduced,  it  has  at 
first  displaced  employees  and  afterwards  has  so  cheapened 
the  product  and  increased  the  demand,  that  in  that  same 
industry  there  has  been  need  of  an  increase  in  the  number 
of  employees.  The  result  will  not  be  different  in  the  case 
of  labor-saving  and  labor-displacing  organizations. 

The  cheapening  of  a  product  not  only  increases  the  demand 
for  that  product,  but  is  sure  to  build  up  many  kindred  enter- 
prises, and  in  time  to  benefit  every  industry.  One  of  the 
most  conspicuous  examples  of  this  is  the  trade  of  printing. 
Few  machines  are  so  nearly  human  in  the  operations  they 
perform,  so  automatic,  as  the  modern  printing  press  which 
takes  a  roll  of  paper,  prints  it  on  both  sides,  cuts  it  int5 
proper  lengths,  folds  it  and  turns  it  out  ready  for  mailing 
or  delivery.  Hardly  any  machine  has  displaced  so  much 
labor.  One  modem  printing  press  will  do  more  work  to- 
day than  five  thousand  men  could  have  done  on  hand 
presses  a  century  ago.  But  the  press  has  reduced  the  cost 
of  printing  newspapers  proportionately.  Even  with  the 
increased  amount  of  news  that  they  furnish,  gathered  with 
amazing  promptness  from  all  quarters  of  the  globe  at  great 
expense,  they  furnish  papers  of  far  greater  contents,  at  a 
fraction  of  the  cost  of  the  old  news-letter.  But  the  increase 
of  their  circulation,  and  the  amount  and  value  of  their 
advertising  space,  have  more  than  kept  pace  with  the  re- 
duction in  price.  More  printers  have  employment  than  did 
when  old-fashioned  presses  were  used,  or  would  in  case 
old-fashioned  presses  were  used  to-day.  But  not  only  are 
there  more  printers, — employment  is  given  to  hundreds  of 
thousands  of  editors,  reporters,  contributors,  newsboys  and 
advertisement  writers;  and  the  businesses  of  manufactur- 
ing presses,  founding  type,  making  printer's  ink,  manufac- 
turing paper,  etc.,  have  given  employment  to  hundreds  of 
thousands  more. 


Trusts  and  Displaced  Labor  165 

This  whole  question  of  displaced  labor  is  but  one  phase 
of  the  question  of  trusts  and  wages,  and  many  things 
stated  in  the  preceding  chapter  are  answers  to  that 
question.  Particularly  should  reference  be  made  to  the 
figures  and  statements  concerning  the  increase  in  the 
number  of  persons  eiiiployed  in  the  cotton  trade.  It  is  a 
fact  of  common  knowledge  that  in  this  industry  there  has 
been  constant  improvement  of  machinery,  and  that  the 
adoption  of  this  new  machinery  has  constantly  displaced 
labor;  but  an  examination  of  the  figures  relating  to  the 
cotton  industries  shows  that  in  sixty  years  there  has  been 
a  great  increase,  not  only  in  the  amount  of  capital  invested 
in  the  industry  and  in  the  product  obtained,  but  also  in 
the  amount  of  employment  and  in  the  wages  paid,  while 
the  price  is  only  one-third  or  one-fourth  of  what  it  was 
in  1830. 

Perhaps  our  groat  means  of  transportation,  the  railway, 
has  done  more  to  displace  labor  than  any  other  modern  in- 
stitution. It  has  dis])laced  all  the  stage  coaches  with  their 
drivers.  It  has  resulted  in  the  closing  of  most  of  the 
road  houses  and  country  inns  with  their  proprietors  and 
their  hostlers  and  their  servants.  It  has  wholly  displaced 
the  canal  packet;  it  has  made  unnecessary  the  building  of 
stage  coaches  and  in  scores  of  ways  has  displaced  labor; 
but  it  has  given  employment  to  hundreds  where  tens  have 
been  discharged.  Take  the  groat  Pennsylvania  railway  sys- 
tem as  an  example.  To-day  it  employs  over  one  hundred 
thousand  men.  Half  a  million  people  are  dependent  upon 
these  one  hundred  thousand.  It  is  a  statement  which  few 
will  care  to  contradict,  that  the  employees  of  the  railway 
are  to-day  better  paid,  and  that  they  work  under  more 
favorable  conditions  than  did  the  men  whom  the  railway 
has  displaced.  The  stage-eoacli  builder  is  practically  out 
of  business;   but  how  vastly  greater  an  industry  is  that  of 


1 66  The  Trusts 

building  railway  cars.  How  infinitely  larger  is  the  number 
of  men  employed  in  this  industry  than  the  number  that 
was  employed  in  stage-coach  building.  Think  of  the  other 
gigantic  industries  that  have  been  built  up  by  the  railways; 
think  for  a  moment  how  railways  have  brought  forth  and 
l)ni]t  up  the  great  steel  industry,  by  their  demand  for  rails 
and  bridge  materials  and  structural  steel  and  locomotives. 
There  can  be  no  question  that  the  number  of  people  en- 
gaged in  transportation  now  vastly  exceeds  the  number  of 
those  engaged  in  the  same  business  in  the  days  of  the  stage 
coach,  even  considering  and  making  allowance  for  the  vast 
increase  in  the  population. 

It  may  be  said  that  railway  companies  are  not  industrial 
trusts.  Well,  then,  take  the  Standard  Oil  Company,  Sta- 
tistics showing  the  number  of  men  engaged  in  that  indus- 
try when  the  trust  was  formed  and  the  number  now  en- 
gaged are  not  at  hand;  but  to-day  the  Standard  Oil  Com- 
pany, although  it  makes  at  least  $25,000,000  a  year,  pays 
out  $125,000,000;  that  is,  its  annual  volume  of  trade  is 
$150,000,000,  of  which  $25,000,000  are  profits.  These 
$125,000,000  go  partly  in  payment  of  crude  oil,  but 
chiefly  in  payment  of  wages  and  the  countless  expenses  of 
business.  The  Standard  Oil  Company  has  developed  a 
foreign  trade  whicli  brings  in  $60,000,000  a  year.  It  is 
conceded  even  by  its  opponents  that  its  employees  receive 
higli  wages. 

A  study  of  the  United  States  census  returns  for  1880  and 
181)0  will  show  that  the  increase  in  the  demand  for  labor  in 
those  industries  in  which  labor-saving  machinery  has  been 
aflopted  lias  not  been  confined  to  the  Standard  Oil  Com- 
pany, tln^  I  r;iii.-;;ortation  business  and  thecotton  trade.  They 
are  tyjiic;;!.  not  exceptional.  Take  the  following  figures, 
selected  fr<jm  a  longer  table  appearing  in  George  G union's 


Trusts  and  Displaced  Labor 


167 


hook,  The  Trusts  and  the  Puhllc.     Tlioy  all  relate  to  in- 
dustries in  which  much  machinery  is  used  : 


Boot  and  shoe,  cut  stock 

Hoot  and  shoe,  uppers 

Boots  and  shoes,  factory  product. 

Boots  and  shoes,  rul)ber 

Boxes,  cigar 

Boxes,  fancy  and  paper 

Boxes,  wooden  j)acking 

Cor<lage  and  twine 

Envelopes 

Furniture,  including  cabinet- 
making,  repairing  and  uphol- 
stering   

Ilouse-furnishing  goods,  not  else- 
where specified 

Iron  and  steel  nails  and  spikes, 
cut  and  wrought,  including 
wire  nails 

Iron  and  steel  pipe,  wrought . . .  . 

Iron  work,  architectural  and 
ornamental 

T^eather  goods 

Oil,  cottonseed,  and  cake 

Oil,  lubricating. 

Printing  and  publishing 

I'mIji,  wood 

Silk  and  sillc  goods 

St;'aiu  fittings  and  heating  appa- 
ratus   

Tools,  not  elsewhere  specified... 

Wirework,  including  wire  rope 
and  cable 


Number  of 
Enipkiyees. 


1880. 


1890. 


Yearly 
Wa;^es. 


1880.   1890. 


>  05   I  .J  eS 


2,885      5,503 1254  .$4221168 


437 

1,708: 

111,152 

139,333' 

4,662 

9.264 

2,365 

5,5:)7; 

9,678 

19,954 

7,722 

13,922 

5,435 

12,799 

1,204 


389 

386 
315 
3161 
245 1 
358 
286 
,501  285 


525 
476 
428 
385 
344 
465 
354 
423 


52,087|  78,667  417 

j      I 

592  3,667;  366 


1361 

90! 

113i 

69; 

99^ 
1071 

68 
138 


66.1 
34.9 
23.3 

35.8 
21.8 
40.4 
29.8 
23.7 
48.4 


547l  130  31.1 
485  119  32.5 


2,910,  17,116  431  456 

5,210  12,064  343  484 

i  i    i 

1.934'  18,672;  436;  640 


1,036 

3,3;  9 

413, 

58,478 
1,209; 

31,3371 


.074 

6,301 

1.072 

165,227 

2.830 

50,913 


443  476 
265  302 
503,  817 
522  635 
367i  434 
291'  386 


25     5.8 
141:41.1 

204146.7 
33'  7.4 
37  13.9 
314,  62.4 
113  21.6 
67:18.2 
95  32.6 


2,474!  11,779    527.  644'  117 
3,151|     7,095;  472|  584,  112 

4,459,     7,917    383'  503    120 


22  2 
23^7 

31.3 


Stati.-ties  thu,-  iin  to  cnrrnborato  the  testimony  of  experi- 
ence and  observation,  and  to  confirm  the  proposition  which 
abstract  roasoiiiiiu-  demonstrates,  tliat,  .crenerally,  in  tlie 
course  of  time,  the  individual  who  has  been  displaced  hy 
labor-saving  maebines  or  organizations^  finds  a  new  place, 


1 68  The  Trusts 

frequently  in  the  same  old  occupation.  It  is  only  by  the 
displacement  of  labor  that  labor  itself  can  make  any  prog- 
ress. The  ability  to  produce  the  same  amount  with  less 
labor  means  cheaper  production.  Cheaper  production 
means  increased  consumption,  so  that  gradually  the  num- 
ber of  persons  employed  in  the  industry  tends  to  increase. 
The  more  we  cheapen  our  product,  the  more  we  can  en- 
large our  market,  foreign  as  well  as  domestic,  and  give  work 
to  our  citizens.  We  cannot  obtain  a  large  market  except 
we  either  pay  less  to  our  labor  or  adopt  that  which  will  ren- 
der it  more  productive.  We  can  render  it  more  productive 
only  by  longer  hours — against  which  we  protest — or  else  by 
introducing  labor-saving  machines  or  adopting  labor-saving 
organizations.  Either  of  the  latter  will  displace  labor,  but 
at  once  the  community  will  get  cheaper  commodities,  and 
in  time  the  worker  will  get  more  work  and  higher  wages. 
Where  is  labor  most  poorly  paid?  Where  there  is  the  least 
machinery",  the  most  antiquated  processes,  the  most  im- 
perfect organization  of  labor.  This  is  as  true  of  nations 
as  of  separate  individual  concerns.  In  the  long  run,  in- 
dustr}',  well  organized  and  well  regulated,  will  be  able  to 
give  more  employment  and  more  continuous  emplo}'ment. 
If  the  people  of  the  United  States  do  not  want  men  thrown 
out  of  employment,  they  should  adopt  every  labor-saving 
machine  and  organization,  so  as  to  produce  cheaply  and  get 
the  markets  of  the  world. 

The  introduction  of  machinery  or  improved  organization 
will,  however,  permanently  displace  labor  and  irretriev- 
ably injure  not  only  the  men  displaced,  but  the  community 
also,  and  ultimately  the  introducer  of  the  machine  himself, 
or  the  man  who  perfects  the  organization,  if  prices  are 
not  lowered.  For  if  the  labor  product  be  not  cheapened, 
if  the  price  be  not  lowered,  there  will  not  only  be  nothing 
tending  to  increase  the  consumption,  but  the  idle  laborers 


Trusts  and  Displaced  Labor  169 

\vill  cease  to  be  consumers.  They  can  no  longer  take  their 
projjortion  of  the  goods  nianui'acturetJ  with  the  machine; 
they  will  not  he  al)Ie  to  he  purcliasers  of  other  products. 
There  will  be  a  glut  of  labor.  Men  who  are  starving  will 
work  for  starvation  wages.  X(jt  only  will  their  own  wages 
be  low,  hut  wages  of  everyone  will  he  depressed.  The  con- 
sumptive power  will  be  reduced,  more  laborers  will  be 
turned  out  of  work,  ])rofits  will  diminish,  manufacturers 
will  fail,  and  with  each  downward  step,  disaster  and  de- 
struction will  gather  momentum.  Prices  cannot  perma- 
nently be  kept  u]);  but  while  they  arc — and  short-sighted 
selfishness  is  sure  occasionally  to  put  them  uj) — all  the  evils 
mentioned  will  occur. 

Will  manufacturers  voluntarily  reduce  these  prices  as 
th.ey  introduce  lal)or-saving  machines,  and  ado])t  labor- 
saving  organizations,  or  will  they  contend  that  tliey,  and 
noi  tiie  community,  are  entitled  to  all  the  saving?  We 
have  seen  in  an  earlier  cliapter  that  cheap  production  even- 
tually results  in  a  lov/er  price.  Competition  in  the  past 
has  compelled  a  reduction  in  the  price  when  there  has  been 
a  reduction  in  the  cost.  When  one  manufacturer  has 
adopted  a  machine,  if  unpatented,  some  other  manufac- 
turer has  also  soon  adojited  it,  and  the  competition  has 
reduced  the  price.  As  human  nature  exists  it  can  hardly 
be  doul)ted  that  if  one  of  many  manufacturers  got  hold 
of  a  machine  that  was  labor-saving  and  cheap-producing, 
he  would  i-('ta.in  all  of  tlie  saving  he  could.  Wlicre  persons 
by  a  patent  obt.iin  exclusive  control  of  a  machine,  they 
invariably  do  this  as  far  as  tiiey  can  ])roritably.  But  even 
patents  expire;  and.  furt hernioi'c,  if  there  were  no  competi- 
tion, self-interest  would  t(^  a  certain  degree  restrain  those 
possessing  a  cheap-jiroducing  machine  or  organizatioii  from 
exacting  an  ext'^'ttinuate  [irice.  They  would  reduce  it  just 
to   the  point   u'liijix-  ilicy  could  make  tlie  go-eatest  prolii: 


I  70  The  Trusts 

not  that  their  anxiety  would  be  to  give  a  low  price,  but  to 
get  a  great  profit.  A  street-car  line  that  charges  tive  cents 
will,  in  any  ordinary  American  city,  make  vastly  more  than 
one  that  charges  ten  cents.  The  former  will  probably  pay 
large  dividends;  the  latter  is  very  sure  to  go  into  bank- 
ruptcy. It  is  true  that  many  owners  may  not  comprehend 
their  real  and  ti'ue  self-interesi,  and  may  charge  high  prices 
to  get  great  ])roflts  in  cases  where  low  prices  would  give 
even  greater  profits;  but,  in  the  main,  tlie  managers  of  these 
properties  know  even  better  tlian  others  the  price  that  will 
yield  the  greatest  profit,  and  whatever  they  think  that 
will  be,  that  they  fix.  In  case  there  is  no  competition  and 
no  satisfactory  substitute  and  the  commodity  or  the  sersdce 
is  a  necessity,  the  price  that  will  pay  the  greatest  profit 
is  not  the  price  that  will  pay  the  fair  profit.  What  w'e 
cannot  get  along  without,  we  will  pay  the  price  for,  eve.a 
though  it  is  unduly  high.  There  are  some  things  in  which 
consumption  will  not  be  diminished  even  by  high  prices, 
because  we  must  have  them  regardless  of  high  prices.  But 
fortunately  for  the  world  nearly  everything  that  is  the  sub- 
ject of  barter  and  sale  has  a  more  or  less  satisfactory  sub- 
stitute. It  is  because  of  this  fact  that  cheap  production 
Avill  invariably  result  ultimately  in  lower  prices,  even 
though  all  the  agencies  of  production  be  in  the  hands  of 
the  greedy  and  the  grasping;  because  as  long  as  there  is 
any  possi1)le  sul)stitute,  there  will  always  be  an  opportunit}*, 
i)y  lowering  the  ])rice.  to  cause  people  to  refrain  from  using 
the  substitute.  If  there  be  no  substitute,  but  if  the  article 
bo  not  an  absolute  necessity,  the  lower  price  will  win  some 
custom  and  trade  wliich  the  high  price  drives  away.  There 
is  tlius  always  a  force  tending  to  make  the  cheap  producer 
lessen  h. i>  prices  and  reach  out  for  new  markets  and  a  larger 
trade.  This  results  in  giving  more  emj)loynient  and  in 
raising  wages,  further,  if  the  producer's  profits  by  a 
new  machine  tliat  ])r(jduces  clieaj)ly,  are  raised,  he  acquires 


Trusts  and  Displaced  Labor  171 

<i  large  amount  of  capital,  and  this  he  must  invest  in  some 
jjroductive  enterprise.  As  a  consequenc^e  tliere  is  more 
work  for  the  toilers.  Tliis  is  undouljtedly  the  inevitable, 
ultimate  result.  Bui  it  may  he  obtained  only  after  long 
delay  and  many  setliacks.  There  will  always  Ije  greed  and 
selfishness.  Trust  owners  have  their  full  share  of  the.se 
vices; — doubtless  many  trusts  are  inspired  by  greedy  and 
monopolistic  motives.  Where  such  motives  exist,  true  self- 
interest  may  be,  for  a  time,  at  least,  overlooked,  and  extor- 
tionate prices  exacted.  If  so,  there  are  sure  to  be,  for  a  time, 
a  lessening  of  the  demand,  a  decrease  in  the  output,  a  need 
for  fewer  workers,  a  lowering  of  wages,  and  wretchedness 
of  the  worst  degree.  If  this  policy  is  inaugurated  there  is 
no  prospect, — at  least  as  long  as  it  is  continued, — of  dis- 
placed labor  ol)taining  new  employment;  for  instead  of 
the  demand  l)eijig  increased,  it  will  be  lessened;  instead 
(tf  the  manufacturer  making  more  money  and  having 
m(U'c  capital  to  invest  in  new  enterprises,  he  will  have  less. 
'J1iis  will  be  the  result  until  low  prices  come  as  a  relief, 
and  the  longer  that  high  prices  prevail  the  harder  will  it 
be — the  less  able  financially  will  the  manufacturer  be — 
to  reduce  jn-ices.  It  is  not  perfectly  satisfactory  to  say 
that  if  we  will  wait  long  enough,  another  policy  than 
high  prices  ■will  suggest  itself  to  trust  owners  as  lieing  not 
only  to  the  interest  of  tlie  public.  l)ut  to  the  interest  of  the 
trusts  themselves;  or  tliat.  if  the  trust  does  not  adopt  this 
wiser  policy,  others  will.  The  temporary  hardship  and 
suffering  and  extortion  are  things  we  should  not  be 
willing  to  endure.  We  want  not  only  to  escape  eternal 
damnation  as  tlu'  jmnishment  for  submitting  to  a  per- 
manent monopoly;  but  we  want  our  economic  policy  at  all 
times  to  accord  so  fully  with  economic  laws  that  our  pen- 
ance will  1)0  slight.  We  want  not  only  to  avoid  an  ever- 
lasting hell.  l)ut  to  make  our  stay  in  purgatory  as  short  as 
possible. 


172  The  Trusts 

The  awful  evils,  then,  which  result  from  the  displacing 
of  labor  by  the  introduction  of  improved  machinery  and 
by  the  adoption  of  improved  methods  of  organization, — 
evils  which  in  the  past  have  been  turned  into  benefits  and 
advantages,  only  because  competition  has  made  low  prices 
follow  low  cost  of  production,  and  because  in  the  wake 
of  low  prices  have  come  increased  consumption,  greater 
demand,  new  employment,  higher  wages, — the  awful  evils, 
which,  in  the  past,  competition  has  turned  into  good,  make 
the  problem  of  trusts  momentous.  Can  we  rely  on  com- 
petition, real  or  potential?  It  seems  clear  that  Ave  can  for 
ultimate  relief;  and  equally  clear  that  we  cannot  hope  that 
it  will  stop  all  occasional  extortions.  If  competition  can 
not  save  us,  then  there  must  be  control  or  restriction.  If 
government  control  is  impracticable  or  inefficient,  and 
trusts  are  not  subject  to  competition,  then  we  must  ren- 
der it  impossible  for  trusts  to  become  so  large  as  to  obtain 
the  control  of  industries,  in  other  words,  absolutely  for- 
bid vast  combinations:  and  as  to  corporations,  limit  their 
capitalization; — lose  the  full  benefit  of  trusts  so  as  to  avoid 
their  evils.  This  is  certainly  the  wisest  policy  if  we  can- 
not escape  the  monopolistic  features  0^  trusts,  for  monopoly 
in  the  end  is  national  bankruptcy  and  misery.  But  shall 
we  have  to  take  these  steps  and  adopt  such  a  policy?  That 
is  the  question  of  the  age.  Only  one  thing  is  certain  and 
that  is  that  as  long  as  we  look  to  competition  to  save  us 
and  still  seek  to  have  the  economic  advantages  of  concen- 
trated capital,  we  must  make  it  possible  for  fair  com- 
petition to  exist;  we  must  stop  cut-throat  competi- 
tion, and  by  ]')ublicity  and  honesty  and  fair  dealing  make 
active  competition  a  power,  and  potential  competition  a 
force.  Perhaps  we  can  directlv  or  indirectly  hasten  the 
time  when  trusts  will  reduce  their  prices  in  proportion  to 
the  lessening  of  the  cost  of  production. 


CHAPTER  IX. 
TRUSTS    AND    THE    FARMER. 

If  trusts  adversely  aft'ect  any  one  of  the  great  industries, 
they  will  in  the  long  run  affect  all  of  them.  If  they  are 
a  burden  and  an  evil  to  one  class,  they  will  become  a  burden 
and  an  evil  to  every  other.  If  they  are  injurious  to  the 
wage-earner,  sooner  or  later  they  will  result  harmfully  to 
the  farmer.  If  they  oppress  the  man  in  the  city,  they 
will  in  time  be  o})pressive  to  the  man  in  the  country.  It 
is  impossible,  however,  to  consider  economic  problems, — 
questions  as  to  the  production  and  distribution  of  wealth 
and  as  to  money  making, — without  each  man  considering 
their  influence  upon  his  particular  industry  and  business. 
It  is  most  natural  that  the  great  agricultural  class  should 
in  this  manner  discuss  the  trust  question.  In  fact,  there 
is  a  certain  peculiar  propriety  in  their  doing  so,  because 
farming  differs  from  manufacturing  and  from  wage-earn- 
ing in  a  special  manner.  In  the  former  industry,  con- 
centration of  capital  and  combination  of  competitors  are 
practically  im])nssih]e.  There  will  always  be  a  lack  of  any 
complete  union.  Kach  farmer  is  a  separate  unit  in  his 
dealings  with  those  with  whom  his  ]>roducts  are  exchanged, 
no  matter  how  much  the  latter  may  be  consolidated.  The 
laborer  in  mills  and  factories  can  with  comparative  ease 
combine  with  his  frllow  laborers;  because,  the  factories  and 
mills  being  situated  in  centers  of  population,  the  laboring 
men  can  meet  without  inconvenience.     In  fact,  they  are 

173 


1 74  The  Trusts 

closely  associated  in  their  daily  work.  But  the  farmers  are 
not  only  millions  in  number^  but  are  scattered  all  over  the 
country.  Union  is  practically  impossible.  The  great  num- 
ber of  those  who  follow  the  pursuits  of  agriculture  consti- 
tutes so  large  a  proportion  of  American  population  tliat  tlie 
effect  of  the  trusts  upon  the  farmer  becomes  a  matter  of 
vital  importance  to  all  the  people  as  well  as  to  the  farmer 
himself. 

In  one  other  respect  the  farmer  has  a  peculiar  right  to 
consider  the  effect  of  trusts  upon  his  business.  lie  is  the 
producer  of  the  raw  material,  and  there  is  a  greater  differ- 
ence between  his  interests  and  the  interests  of  the  sugar 
refiner,  for  example,  than  there  is  between  the  interests  of 
the  sugar  refiner  and  those  of  the  oil  refiner,  or  between 
the  interests  of  the  sugar  refiner  and-  those  of  the  starch  re- 
finer, or  between  the  interests  of  the  sugar  refiner  and 
those  of  the  laborer  in  the  sugar  refinery. 

It  cannot  be  questioned  that  the  farmer  looks  vvith 
great  apprehension  at  the  growth  of  trusts.  As  these 
great  organizations  more  and  more  get  the  control  of 
the  industries  in  which  he  is  especially  engaged,  he 
finds  himself  having  but  one  buyer  for  many  of  his  raw 
materials.  There  is  no  longer  competition  among  buyers. 
It  is  a  case  of  one  buyer,  one  bid  and  one  price,  and  that 
price,  the  farmer  thinks  is  fixed,  not  according  to  the 
value  of  the  product,  but  according  to  his  own  needs  and 
necessities.  If  his  necessities  are  such  that  he  must  make 
the  sale  (and  usually  he  cannot  afford  to  long  hold  back  his 
product),  then  he  must  take  the  amount  offered  him.  The 
farmer  sees  no  hope;  and  it  would  be  very  foolish  to  deny 
that  he  has  cause  for  alarm. 

Let  us,  however,  carefully  investigate  the  condiiion 
of  the  farmer  under  trusts.  '^Fhe  majority  of  the  products 
of  American  farms  are  food  products.    "Wheat  is  the  staple. 


Trusts  and  the  Farmer  1 75 

]5eef,  pork,  mutton  and  lamb  are  other  important  prod- 
uct?;.  Corn,  rye,  rice,  potatoes,  beans  and  Ijarley  are  also 
among  the  chief  articles  raised.  Ik'sides  the.-e,  tliere  is 
an  increasing  cultivation  of  fruits  and  \egetaljles  and 
garden  products.  All  these  ])roducts  re([uire  comparatively 
little  manufacture  in  order  that  tliey  may  hi'  put  upon  the 
market  in  the  form  required  for  linal  consumption.  Wheat 
and  the  other  cereals,  indeed,  have  to  be  ground  into  Hour 
or  meal,  and  this  may  properly  be  considered  a  manufac- 
turing operation.  The  slaughtering  of  cattle  may  also  bo 
considered  manufacturing,  although  it  is  an  extension  of 
the  meaning  of  the  word  to  include  this  industry  under 
that  term.  This  one  thing,  iiowever,  is  to  be  noticed  with 
reference  to  the  food  ])roducts  already  mentioned,  and  thai 
is  that  not  only  do  a  great  many  of  tlieiii  reach  th.e  cnji- 
suiner  in  a  condition  little  changed  from  their  raw  state, 
l)ut  that  the  chief  exceptions,  namely,  wheat  and  the 
cereals,  are  clianged  into  tlour  at  so  many  mills  scattered 
over  so  wide  an  expanse  of  the  country  and  riMpiiring  com- 
paratively so  small  an  amount  of  capital  that,  notwithstand- 
ing condjinations  of  millers  may  be  formed,  the  {)0ssibility 
of  monopolizing  the  milling  industry  is  comparatively  re- 
mote. Further  a  verv  lai'ge  ])ortion  of  the  wheat  that  is 
raised  in  the  country  finds  a  foreign  market  not  as  tlottr, 
but  as  wheat.  Trusts,  then,  that  is,  great  industrial  com- 
binations, are  not  likclv  to  inonopolize  the  purchase  of 
wheat.  The  ])rice  of  wheat,  for  aught  that  trusts  which 
are  directly  engaged  in  the  mark(ning  of  wheat  or  tlie  mak- 
ing of  Ibuir,  can  do.  will  de])end  u|)on  the  demand;  and  if 
great  milling  combinations  can  alToct  economies  in  grind- 
ing the  wheat  inio  flour  so  as  to  l)e  able  to  reduce  the 
price,  they  will  undfuibtedly  be  able  to  stimulate  and  in- 
crease domestic  consumiitioTi  of  Hour.  This  domestic  eon- 
sumption  of  all  food  product-,  whether  they  are  consumed 


1  76  The  Trusts 

in  the  raw  or  in  the  manufactured  state,  i?  sure  to  be  in- 
creased if  the  millions  whose  incomes  are  derived  from 
profits  or  wages  in  manufacturing  industries  are  increased 
in  number,  or  if  they  have  their  profits  or  wages  increased. 
Hence,  whatever  Avill  tend  to  build  up  the  prospcity  of  the 
manufacturer  and  the  wage-earner  will  benefit  the  fanner. 
If  trusts,  by  means  of  their  economies,  can  cause  the  manu- 
facturing Irusiness  of  the  country  to  Ijc  prosperous;  if  they 
can  give  constant  employment  at  remunerative  wages  to 
an  increased  number  of  men:  if  they  can,  by  developing 
foreign  markets,  bring  into  this  country  vast  wealth  from 
foreign  countries,  tlien  will  there  be  an  increased  home 
demand  and  higher  prices  for  American  food  products. 

It  may  be  said  that  combinations  have,  as  a  matter  of 
fact,  depressed  the  price  of  farm  products.  The  ''  Big 
Four  '■  beef  combine  may  be  cited,  and  attention  may  be 
called  to  tlie  fact,  so  often  proclaimed,  that  along  many 
lines  of  railway  there  is  Imt  one  set  of  buyers  for  many 
of  our  staples,  and  that  prices  are  depressed.  AYhatever 
truth  there  may  be  in  the  charges  that  these  coml)inations 
actually  dominate  the  market  for  cattle  and  for  grain 
and  that  they  arbitrarily  lower  prices,  it  will,  we  believe, 
upon  examination  l)e  found  that  it  is  not  so  inuch  their 
possession  of  vast  capital  that  gives  them  thereby  exclusive 
control  over  the  trade  and  prevents  competition,  as  it  is 
a  connection,  secret  and  illicit,  with  those  natural  mon- 
opolies, the  railways;  or  the  possession  of  special  privileges, 
unlawfully  and  improperly  obtained,  at  the  terminals  of 
tho  different  transportation  lines.  These,  indeed,  are 
monopolistic  powers  that  are  in  no  sense  essential  to  trusts. 
If  low  prices  exist  to-flay  for  wheat  or  for  beef  or  for  any 
otluT  of  our  staple  prnrlucts,  tliev  are  caused  not  by  trusts, 
but  by  unlawful  conspiracies  between  the  railway  inter- 
ests and  the  big  dealers  in  these  products, — evils  that  are 


Trusts  and  ihe  Farmer 


// 


in  no  way  essential  to  the  trust  form  of  organization, — 
but  evils  whieh  are  as  unlawful  and  criminal  as  robbery  or 
arson  or  any  other  felony,  and  which  should  be  punished 
in  the  same  way.  The  railway  sliould  never  be  confounded 
with  the  trust.  J^oth  are  gigantic  consolidations  of  capital; 
but  one  in  its  very  nature  i.^  a  monopoly  having  many 
sovereign  j)Owers,  such  as  the  right  of  eminent  domain,  con- 
ferred upon  ii.  and  having  a  right  of  way  or  the  owner- 
sliip  of  a  strip  of  land  and  of  terminal  facilities,  which  from 
the  very  nature  of  the  ownership  of  property  is  exclusive, 
and  which  in  the  case  of  the  railway  is  monopolistic.  The 
trust,  strictly  speaking,  is  a  great  industrial  consolidation, 
engaged  in  manufacturing,  mining,  milling,  or  selling.  It 
lias  no  element  of  legal  or  natural  monopoly  in  it,  except  as 
it  acquires  possession  of  a  public  utility  or  of  products,  such 
as  minerals,  that  are  limited  in  amount,  or  as  it  obtains  a 
legal  monopoly,  such  as  a  ])atent  right.  The  mining  of  an- 
thracite coal,  copper,  gold,  silver,  or  possibly  the  right 
to  furnish  gas,  water,  steam-heat  or  electricity  in  a  city, 
owing  to  the  limited  space  in  the  streets  through  which 
the  pipes  and  conduits  must  be  laid,  is  monopolistic  in  its 
nature;  but  the  control  of  that  whicli  nuiy  be  and  is  con- 
stantly being  })roduced  and  which  can  be  produced  with- 
out limit,  as  can  nearly  every  manufactured  article,  can 
never  become  a  permanent  m()n(jpoly.  If  we  listen  care- 
fully to  the  statements  of  those  v/ho  know  why  the  price 
of  wheat  is  kej)t  down,  if  wt'  analyze  the  reasons  given  by 
them,  we  are  forced  to  the  conclusion — admitting  all  their 
statements  to  be  true — that  the  comljinations  which,  to- 
day, are  .-aid  to  have  killed  competition  among  buyers  of 
our  staple  products,  are  not  industrial  trusts,  but  con- 
spiracies l)etween  favoreil  dealers  and  railway  managers 
who  have  gr()s>ly  violated  their  duties  as  common  carriers 
and  who  have   favoi'ed   certain   dealer.-  and   di-criminated 


1  yS  The  Trusts 

against  others.  Perhaps  no  more  detailed  statement  of 
the  condition  of  the  grain  grower  and  the  absence  of  any- 
thing like  competitive  buying  of  grain^  has  been  given  to 
the  public  than  that  made  about  a  year  ago  by  Mr.  S.  II. 
Greeley  of  Illinois,  a  prominent  member  of  the  Xational 
Grain  Growers'  Association.    We  quote  from  him: 

"  An  evil  from  which  no  relief  is  possible  seems  to  be  an 
absurdity  in  this  age  of  progress  and  discovery,  but  the  producers 
and  shippers  of  grain  iu  the  great  Mississippi  Valley  are  to-day  in 
the  grasp  of  a  number  of  so  skillfully  managed  combinations, 
created  by  secret  rates  and  special  privileges  granted  them  by  rail- 
roads, that  the  briglitest  mind  cannot  suggest  a  practical  remedy." 

"...  ^Merchants  no  longer  buy  and  sell  grain  in  Chicago,  but 
their  places  have  been  usurped  by  the  recipients  of  cut  rates  and 
special  privileges,  who  have  become  as  necessary  an  adjunct  of 
the  modern  railroad,  tapping  the  grain  belt,  as  the  general  freight 
office.  It  is  their  business  to  see  that  the  railroad  favoring  them 
gets  its  share  of  the  grain  tonnage,  and  wliere  a  merchant  paying 
the  tariff'  rates  of  freight  would  lose  money,  this  specially  favored 
class  grows  rich;  they  handle  all  the  grain  that  they  are  physically 
capable  of  caring  for  on  the  particular  line  of  railroad  of  which 
they  are  the  favored  dealers. 

"The  eff'ect  of  this  condition  has  been  disastrous  in  many  ways: 

"  1.  Competition  lias  been  destroyed  to  a  great  extent,  and  the 
business  of  handling  grain  in  Chicago  markets  has  (by  force  of 
special  favors  from  railroads)  concentrated  in  the  hands  of  several 
large  concerns,  who  do  not  bid  against  each  other,  but  are  known 
to  agree  on  prices  each  day  for  gr;iiu  in  territory  where  their  bids 
are  liable  to  reach  the  same  sellers. 

"  Without  advantages  of  aljility  or  capital  over  the  merchants 
whom  they  have  driven  from  tlie  field,  these  concerns,  through 
emj)loyees  and  agents,  carry  on  a  traffic,  not  in  grain,  but  in 
freight,  switcliing  and  elevator  charges;  incidentally  the  grain  i~ 
transp(irt('(l,  but  if  tarilf  rates  and  fixed  charges  were  paid  it 
would  show  a  loss. 

"  2.  \'alu(s  suDer  far  more  than  would  be  conceded  even  by  a 
majority  of  the  grain  growers.  Unnatural  conditions  constantly 
surround  the  iiioveiiiciit  of  grain:  if  the  business  of  a  railrcjad 
lags,  grain  is  forced  to  move  by  that  railroad  through  its  favored 


Trusts  and  the  Farmer  i  79 

shipper,  by  a  cut  rato,  tlius  (.Toatiiig  a  fictitious  supply  at  a  time 
when  the  demand  is  mea^'er,  and  the  result  is  a  decline  in  values 
by  reason  of  excessive  otferings,  while  had  the  grain  been  per- 
mitted to  remain  at  the  country  points  until  the  demand  justified 
its  shipment,  the  depression  in  values  would  have  been  avoided 
and  the  demand  would  have  been  all  the  more  urgent  by  reason  of 
tlie  grain  not  being  in  sight. 

'■  Another  condition  which  tends  to  depress  values  is  the  piling 
up  of  vast  stocks  of  grain  in  the  warehouses  of  Chicago  and  by 
every  trick  and  device  preventing  the  moving  of  these  stocks  so 
long  as  they  can  be  sold  for  future  delivery  at  a  profit.  Tlie 
public  and  private  elevators  of  Chicago  have  passed  into  the  hands 
of  the  concerns  specially  favored  by  the  railroads;  several  of 
them  lease  the  terminal  elevators  of  the  railroads.  The  result  has 
been  that  the  public  warehouse  system  of  Chicago  has  been  pros- 
tituted to  the  extent  that  the  public  no  longer  can  handle  gi-ain 
through  them,  and  what  were  once  the  depots  for  tlie  public's 
grain  are  absolutely  the  storehouses  of  the  railroad's  favored  dealer 
to  the  exclusion  of  all  other  persons.  It  is  to  tlu^  advantiige  of 
this  favored  class  that  low  prices  should  jirevail,  so  that  they  can 
fill  their  vast  warehouses  (aggregating  almost  40,000.000  bushels' 
capacity)  with  cheap  grain,  sell  it  for  future  delivery  at  a 
premium,  buying  back  and  selling  for  a  still  more  deferred  de- 
livery as  often  as  market  conditions  v.ill  permit.  When  it  ceases 
to  pay  tribute  as  a  speculative  cominodity,  they  then  proceed  to 
sell  it  in  eastern  and  foreign  markets,  and  liaving  driven  out  of 
business  all  other  grain  shi{)])ers  by  their  methods,  they  merchan- 
dise the  grain  themselves;  but  no  matter  how  urgent  the  con- 
sumptive demand,  so  long  as  speculative  sales  j)ay  best,  consumers 
(■annot  get  supplies  from  the  vast  stores  held  in  Chicago." 

■■  Practically  all  the  great  railroads  ta])ping  the  grain  belt  are 
in  tlie  grain  business:  the  details  of  their  arrangements  are,  of 
course,  secrets,  but  it  requires  very  little  investigation  to  satisfy 
the  most  skejitical  tliat  they  each  have  one.  two  or  three  con- 
cerns handling  the  hulk  of  grain  on  their  lines,  to  wliom  the  pub- 
lished tarifTs  are  simply  a  guide  as  to  what  the  puf)lic  have  to 
pay;  the  public  sonn  discover  that  the  favored  shipper  can  do 
business  with  an  entire  disregard  of  fixed  charges  and  still  pros- 
per. One  railroad  president  admitted  at  a  public  investigation 
that  his  company  had  organized  a  corporation  for  the  purpose  of 
carrying  on   a  grain   business  at  all  points  on   their  line,   that  it 


i8o  The  Trusts 

was  necessary  to  do  so  to  protect  their  interests,  as  their  com- 
petitors had  arrangements  with  shippers  that  were  practically  pre- 
venting the  competition  of  the  ordinary  shipper." 

It  would  be  most  unfortunate  if,  in  the  study  of  a  new 
form  of  industrial  organization,  we  were  unable  to  distin- 
guish between  those  things  which  are  inherent  elements 
of  trusts  and  those  things  which  are  but  abuses  of  their 
powers.  It  would  be  still  more  unfortunate  if  we  should 
confound  trusts  which  are  merely  industrial  organizations 
engaged  in  manufacturing  or  trading  or  mining,  and  hav- 
ing, under  fair  trade  conditions,  no  monopolistic  powers 
whatever,  with  railways,  which  are  in  tlieir  nature  essen- 
tially monopolistic.  It  would  be  equally  unfortunate  if 
we  should  fail  to  distinguish  trusts  which  are  vast  indus- 
trial organizations  with  power,  by  reason  of  concentration 
of  capital,  to  effect  great  economies  in  production  and  dis- 
tribution, from  mere  combinations  of  separate  producers 
and  distributers  who  agree  to  raise  prices  or  to  decrease  out- 
put, but  whose  business  methods  are  a  continuation  of 
old  time  methods  of  separate  individual  production  and 
distribution,  and  whose  sole  purpose  is  to  obtain  higlier 
prices  without  effecting  any  savings.  Eailroad  discrimina- 
tion in  favor  of  a  trust  is  by  no  means  proof  that  trusts  can 
not  exist  without  railroad  discrimination,  or  even  that  it  is 
])racticed  in  favor  only  of  trusts.  It  does  not  even  bring 
up  the  question  as  to  the  advantages  or  disadvantages,  or 
Ijonefits  or  evils  of  trusts.  It  merely  suggests  certain  evils 
iu  the  management  of  what,  in  its  nature,  is  a  monopoly, 
namely,  a  railroad,  over  whicli,  tlierefore,  the  people  have 
and  should  exercise  final  and  supreme  control.  If  the 
"  Big  Four  ''  of  the  beef  combine  or  the  Standard  Oil  Com- 
pany or  great  warehousing  interests,  or  tlie  anthracite  coal 
companies  or  the  whisky  trust,  or  any  other  trust  or  any 
person  whatsoever,  receive  from  railroads,  rates  that  dis- 


Trusts  and  the  Farmer  i8i 

criminate  in  their  favor  and  afrain^t  their  competitors — 
as  unquestionahly  some  of  tlie  trusts  and  many  other  busi- 
ness concerns  (including  many  {)rivato  ones)  have  re- 
ceived— then  the  step  that  should  be  taken  is,  such  statu- 
tory prohibitions  and  regulations,  such  penalties,  the  re- 
quirement of  such  publicity  of  rates,  such  management 
and  control  of  railways,  if  needed,  that  discrimination  will 
be  impossible.  But  it  would  be  as  foolish  to  prohibit 
trusts  for  these  reasons  as  it  would  be  to  enact  a  law  against 
the  employment  of  clerks  or  salesmen  in  stores,  because 
many  clerks  and  salesmen  liavo  stolen  moneys  of  their  em- 
ployers. The  farmer's  most  etlicacious  remedy,  then,  is 
not  tlie  destruction  of  that  which  will  foster  manufactur- 
ing and  mining  and  milling,  but,  in  the  language  of  J.  C. 
ITanley,  of  the  National  Farmers"  Alliance  and  the  Indus- 
trial Union  of  America. 

"  the  protection  of  the  American  prain  markets  from  railroad 
and  warehouse  monopol}'  and  the  encouragement  of  local  and  ter- 
minal competition." 

Abolish  these  railway  discriminations  and  these  terrain  il 
monopolies,  and  the  price  of  wheat  and  of  cattle  and  of 
nearly  every  other  staple  product  of  American  agriculture 
will  be  governed  by  the  law  of  supply  and  demand.  At 
the  Chicago  Trust  Conference,  J.  G.  Schonfarber,  of  the 
Executive  Committee  of  the  Order  of  Knights  of  Labor, 
delivered  an  address  distinguishing  the  combinations  which 
profit  by  franchises  and  special  ])rivileges,  and  which 
thereby  have  monopolistic  powers,  from  the  great  indus- 
trial trusts  wliich  profit  solely  by  combination  of  capital. 
Willi  reference  to  the  evils  of  railroad  discrimination,  he 
said  : 

"  \\'ith  absolute  equality  over  tlie  railways  of  the  country,  so 
that  every  butcher  could  ship  a  car  of  cattle  just  as  cheap  as  the 
beef  trust,  the  beef  trust  could  not  hold  the  monopoly  of  the  beef 


iS2  The  Trusts 

trade;  with  a  like  condition  every  owner  of  coal  lands  could  reach 
the  coal  market  on  the  same  terms  as  the  monopolistic  combina- 
tion of  coal  owners,  and  this  is  true  in  regard  to  nearly  every  in- 
dustry monopolized  by  trusts.  Their  control  of  the  means  of 
access  to  the  markets  or  their  connection  with  tliose  who  do  con- 
trol these  means  of  access  is  tlie  principal  source  of  their  power." 

AVliether  or  not  he  is  right  in  his  statement  that  the 
))cei'  combine  or  the  coal  combine  woukl  lose  its  power  ii' 
there  was  no  discrimination  in  its  i'avor^  we  cannot  say; 
but  there  can  hardly  be  a  doubt  that,  with  equal  rights  of 
transportation  to  all,  there  would  be  no  undue  depression 
of  the  prices  of  raw  materials. 

If  the  farmer  does  secure  the  abolition  of  railroad 
discrimination,  so  that  there  can  be  at  least  fair  competi- 
tion, and  so  that  only  the  economically  superior  competitor 
can  succeed,  are  there  any  other  ways  in  which  the  farmer 
can  be  benefited?  Does  he  not,  indeed,  need  some  other 
]ncans  to  obtain  prices  which  will  be  remunerative  to  him? 

It  is  stated  that  the  records  of  the  Agricultural  Depart- 
ment show  that  the  average  cost  per  pound  of  raising 
cotton  is  six  and  two-tenths  cents,  while  the  average  market 
price  for  a  number  of  years  has  been  between  four  and  one- 
half  and  five  cents.  The  American  crop  amounts  to  3,500,- 
000,000  pounds  per  year.  The  loss  of  national  wealth  can 
be  easily  com])nted.  Further,  it  is  a  notorious  fact  that 
for  many  years  the  cost  of  wheat  production  has,  as  a  rule, 
been  in  excess  of  the  market  price.  The  remedies  for 
tliese  evils  are:  first,  protection  of  the  American  market 
from  wareliouse  and  terminal  monopoly,  and  the  abolition 
of  all  discriminations  tending  to  favor  a  few  buyers  at  the 
expense  of  the  many  and  enabling  a  few  to  monopolize  the 
trade:  soconilly,  an  increase  of  the  domestic  demand,  that 
is,  the  fleinand  oi  the  manufacturers  and  the  merchants 
and  wag(■-(■arne^^  of  the  Fast  and  Xorth,  who  arc  not  them- 
selves gr(nvers  of  wlieat  and  cotton.      We  have  shown  how 


Trusts  and  the  Farmer  183 

\hv>c  two  roniodies  will  work.  IJut  tjio  third  remedy  is 
the  enlaru-ctiicnr  ;ind  exii'n.-ioii  of  the  foreign  market. 
To-day  the  uhe.it  .tzrowcr  nf  .Vmcrica  ha.s  pi'aeli- 
eally  hut  one  rcreiuti  markfi,  iiaiiudy,  Mii^-land.  whieh 
is  also  our  .ui'cal  l'orei,irii  market  for  raw  eoltoii.  Wa 
can  to-day  produce  twice  the  amount  of  wheat  or  meat  or 
tt'xtile  fabrics  that  we  need.  We  now  [irodiice  in  round 
nuiid)ers  oOO, 0(10,1)00  bushels  of  wheat,  per  annum:  of  that 
we  consume  100,000,000  busliels  ami  export  about  100,- 
000,000.  The  price  is  lart^ely  atl'ected  by  the  Liverpool 
market.  But  let  the  American  farmer  obtain  another  for- 
ei,irn  market  in  addition  to  the  one  he  now  has  and  the 
price  of  wheat  will  increase  enormously.  Any  af,''cncv  that 
Avill  create  competition  and  give  us  another  market  will 
stimulate  the  ]irices  which  competitors  will  estal)lish  in 
order  to  >ectire  the  food  products  which  they  must  have. 
The  possibilities  for  the  American  wheat  grower  in  the 
develo])ment  of  the  Oriental  market  for  American  wheat 
are  truly  wondrous.  It  has  l)een  estimated  that  if  ths 
400,000,000  of  ])eople  in  the  Orient  were  to  consume  but 
half  a  peck  of  whe;it  per  ca])ita,  or  an  amount  that  is  only 
about  l-40th  of  the  average  consumed  by  Americans,  we 
could  market  each  year  r)0,(»Or),000  busliels  of  wlicat.  What 
an  elTect  this  would  have  on  increasing  the  ])rice  of  wheat! 
-T.  ('.  Henley  lia.s  com])uted  that  the  establishment  of  this 
market  would  rai-(^  the  ])rice  of  wheat  fifteen  or  twenty 
cents  a  l)U.-]!cl  for  our  cmtire  croji,  whether  sent  to  Europe 
or  the  Orient  or  consumed  at  hom'\  making  an  annual  in- 
crease of  between  .-eve]ity-flve  and  one  hundred  million 
dollars  ($:  .^.Ooo.ooo  and  ;<1 00.000.000). 

T^esid(>s  food  [product--,  tlu^  farmer  raises  many  other 
croiis.  A>  ;i  rule,  tlie-e  whitdi  are  not  food  products  mtist 
(TO  throui;'!)  manv  processes  of  manufacture  before  they  ar':" 
readv  for  the  rni:il  consumer.      Cotton  is  the  greatest  of 


184  The  Trusts 

American  products  of  this  kind.  One  thing  is  universally 
true  of  all  these  raw  materials,  and  that  is  tiiis,  the  extern 
of  the  demand  for  them  depends  upon  the  extent  of  the 
market  for  the  manufactured  article.  I.ct  tiiere  ho  a  very 
slight  demand  for  manufactured  cotton  products,  and  the 
price  of  raw  cotton  wilt  be  veiy  low.  Jx't  there  be  an  in- 
creasing demand  for  the  manufactured  article  and  there 
will  he  a  rise  in  market  price  for  cotton  in  the  bale.  What- 
ever, then,  tends  to  enlarge  our  markets,  tends  to  increase 
the  sum  paid  to  the  producer  of  the  raw  materials.  If 
trusts,  by  producing  more  (■hea})ly  than  others,  or  by  de- 
veloping valuable  foreigji  markets,  can  increase  their  sale^, 
they  will  increase  the  demand  for  the  jiroducts  of  Ameri- 
can farms.  Instead  of  de])ressing  the  price,  they  will  stimu- 
late an  increased  production  and  increase  the  price.  p]ven 
the  Standard  Oil  Company,  by  bringing  into  this  coun- 
try each  year  $()(), 000, 000  of  foreign  gold  in  payment 
for  oil  that  is  sold  abroad,  aids  the  American  farmer;  for 
whatever  tends  to  increase  the  wealth  of  the  country,  in- 
creases its  purchasing  power.  We  have  alluded  already  to 
the  remark  made  by  Prof.  Jenks,  of  Cornell  University, 
that  a  leader  of  one  of  the  great  trusts  had  tokl  him  that 
in  one  year  they  had  received  $500,000  as  profits  from 
foreign  trade,  and  that  every  particle  of  the  raw  material 
had  been  produced  in  America,  and  that  the  increased 
trade  stimulated  the  production  of  the  raw  material  and 
kept  up  the  price  and  gave  employment  to  more  men  than 
Iiad  been  thrown  out  of  employment  ]\v  the  combination. 
One  of  the  best  and  most  dispassionate  books  ever  written 
on  tlie  trust  is  that  written  by  Ernst  Von  Halle  in  1890. 
Commenting  at  that  time  upon  the  charge  that  trusts  de- 
pressed tiio  price  of  raw  materials,  lie  said: 

"It  cannot  he  denied  thnt   the  prife's  of  raw  materialp  have  in 
Eome  instances  been  depressed.     The   United  States  Leather  Com- 


Trusts  and  the  Farmer  185 

paiiy,  wliirh  ooiitroLs  all  tlie  solc-loathor  tanneries  of  the  country, 
:i.s  far  south  as  Texas,  succceih'd  in  re(iucinr^  prices  immediately 
after  its  appearance  in  tlie  markets  of  Cliicago  and  Kansas  City. 
It  niaintiiins  a  purchasing  agent  in  Chicago.  Jn  the  face  of  the 
ring  of  packers  it  does  not  st'cm  to  have  violently  changed  the 
dynamics  of  supply  and  demand,  but  only  to  have  readjusted 
them.  The  American  Tobacco  Company  is  said  to  have  depressed 
the  purchasing  jirice  of  cigarette  tobacco  in  the  leaf  by  several 
})er  cent  immediately  after  it  began  business.  But  we  also  observe 
a  tendency  in  the  opposite  direction.  With  the  increase  of  the 
cotton  oil  production,  the  price  of  cottonseed,  which  the  trust 
had  at  first  somewhat  depressed,  rose  much  above  the  former  level. 
The  trusts  urge  in  their  defence  that  in  consequence  of  their 
ell'orts  to  increase  consumption,  the  producers  are  given  the  oppor- 
tunity to  dispose  of  much  more  raw  material,  and  that  thus,  in 
the  end,  they  will  enjoy  an  increase  of  total  profits,  even  where 
prices  are  reduced."' 

To-day  America  ha?;  ini])arallele(l  opportunities  to  ac- 
(piire  a  market  in  tlie  Orient.  Tlie  diplomatic  tact  and 
firmness  of  the  present  Secretary  of  State  of  the  United 
Slates  have  achieved  for  us  the  "open  door"  to  the  mar- 
kets of  Cliina.  We  are  assured  equal  trading  privileges 
with  the  "  most  favored  nations."'  Xo  class  is  nujre  vitally 
interested  in  this  great  achievement  than  the  cotton  grow- 
ers. Xo  section  will  he  ])rospcred  more  hy  it  than  the 
South,  for  China,  with  its  ;5.')0,00(),0()0  peo])le,  ])resents  an 
illimitahle  market  for  American,  cotton.  Since  this  cotton 
i>  in  till'  manufactured  form,  the  devehjpment  of  the 
Chinese  market  means  prosperity  and  success  for  the  cot- 
ton mills  of  Xew  England,  as  well  as  for  the  cotton  grower 
of  the  South.  In  the  chapter  on  Trusts  and  l-'xpansion, 
fuller  consideration  will  he  given  to  the  great  possihilities 
for  America  in  trade  with  the  Orient. 

^Moreover  the  fanner  has  interests  in  the  effect  of  trusts 
other  than  those  tliat  pertain  to  him  as  a  producer.  Much 
as  he  mav  produce,  the  number  or  amount  of  things  that 


1 86  The  Trusts 

he  consiiniG?,  is  very  great.  He  has  a  few  products  to  dis- 
pose of;  but  as  the  years  go  by,  the  number  and  variety  of 
tlie  things  that  he  obtains  in  exchange  for  them  increase, 
for  his  wants  enhirge  with  the  progress  of  civilization.  He, 
by  no  means,  raises,  even,  all  of  his  food.  His  coffee  and  tea 
and  spices  and  generally  his  sugar  and  molasses  and  many 
other  things  that  he  eats  and  drinks,  are  purchased  rather 
tlian  produced  by  him.  It  is  only  in  the  most  primitive 
and  remote  and  backward  of  agricultural  communities  that 
the  housewife  now  spins  or  weaves  as  a  part  of  the  home 
life;  for  homespun  clotliing,  even  if  the  domestic  labor  is 
not  considered  at  all  in  ascertaining  cost,  is  rarely  as  cheap 
as  that  which  can  be  produced  in  mills  and  factories 
and  obtained  in  the  form  of  ready  made  clothing. 
Further  the  farmer  finds  his  great  expense  not  in 
that  which  he  eats  and  drinks,  nor  in  that  which  he 
wears;  but  in  the  cost  of  tools  and  implements  and  utensils, 
of  wagons  and  reapers  and  mowers  and  plows,  of  drills  and 
drags  and  cultivators,  and  also  in  the  numerous  articles 
which  are  needed  to  furnish  the  house  of  the  American 
farmer  and  nuike  it  a  typical  American  home.  The  farmer 
is  vitally  interested,  then,  like  all  the  other  classes  of  the 
community,  in  everything  that  means  a  cheapening  of  the 
cost  of  production  and  a  lowering  of  the  price.  The  great 
industrial  combinations,  we  have  seen,  are  able  to  cheapen 
])rodnction;  and  we  have  shown  that  it  is  impossible  for 
them  permanently  to  charge  more  than  a  fair  price,  or  to 
oljiain  more  than  a  fair  profit  over  the  cheapened  cost  of 
j)roduetion.  AVhile  the  farmer  does  not  want  to  see  the 
])rice  of  the  ])roducts  which  he  sells  diminished  one  farth- 
ing, yet  he  lias  not  the  slightest  objection  to  seeing  all  those 
things  which  he  buys,  reduced  in  price,  fifty  or  even  seven- 
ty-five ])(:v  cent.  This  is  just  what  the  farmer  has  seen  as 
as  a  result  of  industrial  combination  in  the  last  half  cen- 


Trusts  and  the  Farmer  187 

tury.  In  the  case  of  many  products,  he  has  seen  it  occur 
within  shorter  periods.  We  have  already  referred  in  pre- 
ceding chapters  to  the  Ignited  States  Senate  Committee's 
report  on  prices  from  18(iU  to  ISiH.  This  committee  in- 
vestigated about  two  hundred  common  articles, — manufac- 
tured articles  as  well  as  raw  materials.  Fifty-eight  products 
of  agriculture,  in  wliich  little  centralization  of  capital 
and  little  combination  of  effort  were  possible,  showed  in- 
creases in  prices,  varying  from  thii'ty  to  one  hitndred  per 
cent;  while  the  prices  of  one  hundred  and  forty  groups  of 
manufactured  products,  in  the  making  of  which  labor- 
displacing  machinery  had  largely  been  introduced,  fell 
from  sixty  to  forty  ])er  cent,  and  some  as  much  as  seventy 
})er  cent,  notwithstanding  there  had  been  a  large  increase 
(sixty-eight  ])cr  cent)  in  wages. 

It  would  be  folly  to  deny  that  there  is  danger  in  trusts 
to  the  farmer.  The  popular  fear  is  that  the  prices  of  the 
articles  manufactured  from  his  raw  materials  will  be  unduly 
raised.  The  demand  is  ever  for  low  prices.  The  manu- 
facturer who  first  yields  to  that  demand  obtains  the  en- 
hirged  trade.  The  trust  by  selling  at  low  prices  can  in- 
crease its  output.  I'here  is,  indeed,  a  constant  effort  on 
the  part  of  the  trust,  if  it  seelcs  to  enlarge  its  output,  to 
cheapen  the  cost  of  articles  which  it  produces  and  sells,  by 
obtaining  its  raw  materials  as  well  as  its  labor  at  the  lowest 
prices.  By  so  doing  it  can  obtain  large  profits  without  rais- 
ing prices.  Extortionate  profits  can  in  this  way  longer  bo 
foncealed  from  the  public.  But  the  ultimate  discovery  of 
these  extortionate  profits  is  sure  to  arouse  competition,  and 
with  comjietitiiui  will  come  higher  prices  for  raw  materials 
and  lower  jirices  for  the  manufaetured  goods.  That  is  one 
side  of  the  picture  On  ih.o  i'\]]-r  r^ide.  tlie  trusts  are  bet- 
ter able  to  give  fjiir  ]ii'i(H'S  to  ilie  producer  of  the  raw  ma- 
terials in  just  the  proportion  that  the  trusts  control  the 


1 88  The  Trusts 

price,  in  just  the  proportion  that  the  trusts  control  the 
market.  They  can  afford  to  pay  high  wages  for  labor  and 
good  prices  for  raw  materials,  if  they  have  that  practical 
monopoly  of  the  market  which  so  many  attribute  to  them; 
because  they  can  recoup  the  increased  cost  by  an  increase 
in  price.  The  real  and  important  truth  is  this:  the  cheap- 
est producer  and  seller  will  get  the  trade.  The  nation  or 
individual  that  produces  with  the  least  waste  will  win  in 
the  struggle  for  the  world's  industrial  supremacy.  The 
demand  for  cheap  goods  will  require  the  use  of  nearly 
every  means  of  lessening  cost.  The  producer  or  the  nation 
of  producers  that  does  not  adopt  every  labor-saving  ma- 
chine and  also  every  labor-saving  organization,  so  as  to 
make  labor  productive  and  so  as  to  sa\'e  waste,  can  sell  its 
goods  in  competition  with  others,  only  by  depressing  the 
price  of  its  raw  materials  or  the  wages  paid  to  its  em- 
ployees. It  will  not  l)e  difficult  to  do  this,  because  if  the 
producers  of  raw  materials  do  not  sell  them  at  the  depressed 
price  they  will  be  unable  to  sell  them  at  all.  On  the  other 
hand,  the  producer  who  saves  every  waste  in  distribution 
and  production  will  be  able  to  sell  so  cheaply  that  he  will 
build  up  a  big  trade  and  have  greater  need  for  raw  materi- 
als and  therefore  will  pay  more  to  get  them.  The  conclu- 
sion of  the  whole  matter  is  this:  those  avIio  unite  in  great 
industrial  organizations  to  produce  are,  by  their  savings  in 
production  and  in  distribution,  generally  able  to  obtain  a 
fair  profit  even  while  maintaining  low  prices  for  their 
jiroducts,  and  while  paying  increased  wages  and  the  same 
or  higher  prices  for  raw  materials;  but  all  those  who  pro- 
duce by  the  extravagant  methods  that  tend  to  excessive 
competition  are  sure  ultimately  to  lose  this  trade  and  to 
fail  to  continue  as  competitive  liidders  for  the  raw  ma- 
terial of  tlic  farinor. 

The  farmer,  indeed,  has  much  at  stake:  but  the  tru2 


Trusts  and  the  Farmer  189 

policy  for  him  would  seem  to  be  to  encourage  the  growth 
of  home  industries,  thereby  increasing  the  home  market 
for  his  products;  to  support  every  policy,  industrial  or 
political,  that  will  enlarge  the  foreign  market, — either  that 
which  will  cause  a  demand  for  his  raw  products  in  their  raw 
condition  or  that  which  will  foster  an  increased  demand  for 
American  manufactured  articles, — thereby  bringing  into 
the  country  increased  wealth  for  expenditure  in  the  pur- 
chase of  American  products,  all  of  which  have  their  ulti- 
mate source  in  the  American  farm;  and  finally  the  farmer 
will  consider  but  one  of  the  two  sides  of  his  interests  if 
he  regards  himself  solely  as  a  producer  and  forgets  that  his 
own  wants  and  needs  are  largely  supplied  by  the  American 
manufacturer,  miner,  and  miller,  and  that  everything 
which  tends  to  cheapen  and  lower  the  prices  of  the  products 
of  these  industries,  enables  the  farmer  to  obtain  more  of 
the  necessities  and  comforts  of  life  in  exchange  for  his  own 
agricultural  products. 


CHAPTER  X. 

TRUSTS    AND    SPECIAL    PRIVILEGES. 

So  far  in  our  discussion  of  trusts  and  their  causes,  ad- 
vantages, and  evils,  we  have  considered  almost  wholly  the 
trust  which  is  the  natural  combination  of  producers  who 
have  found  the  struggle  of  competition  so  ruinous  that,  in 
order  to  avail  themselves  of  the  economies  that  come  from 
consolidation  and  to  avoid  the  enormous  wastes  of  compe- 
tition, they  have  united  their  interests.  AYe  have,  perhaps, 
considered,  not  the  typical  trust,  but  the  exceptional  and 
the  possible — the  ideal  trust.  Our  reason  for  doing  so  has 
not  been  any  desire  to  build  up  theories  of  legislation  based 
upon  hypotheses,  but  to  present  the  question  of  the  bene- 
fits and  the  injuries  of  trusts,  even  Avhen  they  are  formed 
for  purely  industrial  purposes,  and  when  their  methods 
and  practices  are  only  those  which  are  incidental  to  the 
conditions  of  modern  business  life.  It  must  be  admitted, 
we  believe,  by  the  unprejudiced,  that  even  the  trust 
that  is  bereft  of  special  privileges  and  managed  with 
absolute  honesty  and  with  perfect  fidelity  to  the  interests 
of  all  concerned  in  it,  and  conducted  in  conformity  with 
the  letter  of  every  existing  statute  and  solely  for  the  pur- 
pose of  making  money  like  any  other  business  industry, 
presents  possibilities  of  industrial  as  well  as  social  and  po- 
litical injury  to  the  country.  The  evils  as  well  as  the  ad- 
vantages of  these  trusts — ideal  trusts,  if  you  jjlease  to  call 
them  so — we  liave  already  considered.      We  believe  that, 

190 


Trusts  and  Special  Privileges  191 

while  they  may  for  limited  jU'riods  be  [larmtul  and  even 
noxious,  yet  in  the  long  run,  when  riglitly  formed  and  hoii- 
estly  managed,  even  although  those  in  control  are  actuated 
only  by  self-interest  and  a  desire  for  gain,  they  will  become, 
on  the  whole,  great  means  for  tlie  cheaper  production  and 
more  generous  distribution  of  all  material  comforts,  and 
mighty  agencies  in  advancing  civilization  and  in  elevating 
mankind  to  a  higher  })osition;  that  competition  is  sure  to 
prevent  any  permanent  monopolistic  evils  in  them,  and  that 
upon  any  temporary  monopolistic  evils  we  may  properly, 
— in  fact,  should  adopt  stringent  restrictions,  in  case  our 
future  experience  proves  to  us  that  legislative  remedies  will 
be  more  speedy  or  more  effective  than  economic  remedies. 

We  are  charged  with  being  idealistic,  visionary  and  theo- 
retical in  considering  trusts  in  the  way  that  we  have.  A\'e 
are  told  that  trusts  are  not  prompted,  as  a  matter  of  fact, 
by  considerations  of  more  economic  production  or  cheaper 
distribution;  tliat  they  are  not,  in  reality,  the  result  of 
competition;  that  they  are  not  formed,  as  a  rule,  in  order 
to  save  their  organizero  from  impending  bankruptcy  and 
ruin;  that  experience  shows  that  they  do  not  grow  in  size 
and  acquire  their  enormous  strength,  because  of  their 
powers  as  cheap  producers  and  distributers;  but  that  they 
are  ordinarily  organizations  for  the  purpose  of  plundering 
the  ])eople;  that  they  are  institutions  of  huma7T.  greed  and 
avaric'c;  that  they  are  nourished  and  supjiorted  and  built 
up  by  favoriti>m  and  fraud;  that  they  are  tlie  creations  of 
special  privileges;  and  that,  if  it  were  not  for  these  privi- 
leges, in  a  free  figlit  and  a  fair  field  tliese  great  organiza- 
tions would  be  defeated  in  the  struggle  of  competition  by 
the  smaller  enierprises  whicli  are  under  the  direct  per- 
sonal management  of  their  owners. 

The  s]iecial  [irivileges  which  it  is  generally  said  are  tlio 
cause  of  the  growth  of  trusts  are  railroad  discrimination, 


192  The  Trusts 

certain  tariff  rates  which  happen  to  be  excessive  rather 
than  protective,  unfair  taxation  and  the  free  granting  of 
public  franchises.  We  believe  that  very  nearly  all  of  the 
trusts  owe  not  only  their  strength  but  their  formation  to 
privileges  of  the  kinds  mentioned,  which  are,  indeed,  rob- 
beries of  the  public  at  large  for  the  purpose  of  rewarding 
the  favored  few. 

Eailroad  discrimination  in  favor  of  one  person  and 
against  another  is  an  act  that  cannot  be  denounced  in 
terms  too  strong.  If  there  is  in  the  Avhole  category  of  mis- 
deeds any  one  affecting  only  property  rights,  which  is  more 
heinous  and  villainous,  more  mean  and  contemptible 
in  its  methods,  more  pernicious  in  its  results,  than  railroad 
discrimination,  we  do  not  know  it.  xA.rson,  when  life  is 
not  endangered,  does  nothing  but  destroy  some  property; 
but  arson  is  quick  in  execution,  and  against  its  damages 
every  cautious  man  is  insured.  The  burglar  and  the  thief 
may  rob  us  of  our  property,  yet  they  can,  at  the  most,  take 
but  little.  But  the  railroad  which  discriminates  in  favor 
of  one  shipper,  stealthily,  although  gradually,  takes  from 
all  others  the  profits  of  their  business  and  the  value  of 
their  property.  It  not  only  aids  in  the  stealing  of  prop- 
erty; but  with  a  malice  that  is  almost  intolerable  to  con- 
sider, its  victim  is  lured  on  to  constantly  endeavor 
to  acquire  more  property,  to  build  up  his  business,  to  over- 
come the  unseen  advantage  in  the  industrial  march  which 
liis  competitor  has,  and  thus  to  keep  on  in  a  struggle 
throughout  which  the  victim  hopes  and  strives  against  in- 
exorable fate.  Kailroad  discrimination  is  a  contem])tible 
criine,  because  it  is  stealing  from  those  who  are  the  support 
and  tbe  maintenance  of  railways;  because  it  is  the  })lunder- 
ing  of  tbose  who  have  given  to  railways  their  enormous 
powders  and  their  very  right  to  existence;  because,  further- 
more, it  is  an  act  absolutely  in  violation  of  the  implied 


Trusts  and  Special  Privileges  193 

agreement  of  the  railways  to  serve  all  alike.  A  book  to 
which  frequent  reference  will  be  made  during  the  discus- 
sion of  the  trust  ([uestion,  is  that  whicli  was  written  by 
Henry  D.  Lloyd — ""  Wealth  Against  C amnion  wealth.'^  To 
many,  "  Weallk  Against  CommoniveaWi,'"  with  all  its  liar- 
rowing  tletails  of  fraud  and  favoritism,  of  oppression  and 
crime,  may  seem  like  an  indictment  or  arraignment  of  in- 
dustrial combinations;  but  it  is  in  no  sense  such  a  docu- 
ment. A  careful  reading  of  it  will  show  that  it  does  not 
even  purport  to  be  an  indictment  against  combinations 
themselves,  for  in  one  of  the  very  early  chapters,  the  uni- 
versal and  natural  tendency  to  combination  and  concentra- 
tion is  summed  up  in  that  expressive  phrase  of  Mr.  Lloyd: 
"  Monopoly  is  business  at  the  end  of  its  journey."  But 
'•  Wealth  Against  Commomvealth''  is  a  specific  indictment, 
replete  with  charges  and  counts,  apparently  substan- 
tiated by  evidence,  showing  railroad  discrimination,  unfair 
competition,  and  the  practice  of  methods  of  corruption,  by 
bribery,  intimidation,  and  improper  influence,  in  order 
either  to  obtain  the  possession  of  public  utilities,  or  else  to 
induce  public  officials  to  refrain  from  enforcing  statutes 
enacted  for  the  purpose  of  protecting  the  public  from  crim- 
inal acts.  The  great  crime — the  special  sin — which  "Wealth 
Against  ConinionicealtJi''  exposes  to  the  public  gaze  is  rail- 
road discrimination.  Li  an  age  when  men  produce  but  a 
few  of  the  things  which  they  consume,  and  when  that 
which  one  produces  is  of  little  value  to  him,  except  ac- 
cording to  his  ability  to  exchange  it  protitably  for  some- 
thing else,  things  are  worth  not  what  they  cost,  but  what 
they  will  bring  upon  sale  or  in  exchange.  Deny  one  access 
to  the  nuirket  and  you  render  valueless  his  product.  The 
highway  and  the  railway  and  every  other  channel  of  trans- 
portation are  the  a\enues  along  which  ilow  all  the  wealth 
of  commerce.      ^Market  value  is  the  onlv  value  that  con- 


194  The  Trusts 

cerns  the  merchant  and  manufacturer.  He  who  has  the 
cheapest  means  of  reaching  the  market  has  wealth  assured 
him.  He  who  is  ^^revented  from  reaching  the  market  on 
equal  terms  is  being  constantly  robbed.  It  is  said,  "  There 
is  no  royal  road  to  learning."  By  that  is  meant  there  is 
no  easy  way  to  acquire  knowledge.  But  the  royal  road  to 
wealth  is  the  railroad  that  discriminates  in  one's  favor  and 
against  one's  competitors.  Eailroad  discrimination,  how- 
ever, is  by  no  means  an  inherent  evil  of  industrial  trusts. 
It  is  rather  an  evil  of  the  railway  system.  There  seems  not 
the  slightest  reason  to  doubt  that  numerous  trusts  have 
received  more  favorable  rates  than  their  competitors;  that 
they  were  built  up  and  sustained  in  this  way.  It  by  no 
means  follows,  however,  that  all  trusts  have  received  such 
favors,  nor  that  railways  have  discriminated  in  favor  of 
trusts  only.  Railway  discrimination  has  been,  and  is  to- 
day unquestionably  being  practiced;  but  large  individual 
shippers  are  quite  as  apt  to  be  the  beneficiaries  of  this 
crime  as  the  larger  trusts.  Whoever  is  the  beneficiary,  is 
the  beneficiary  of  a  fraud  and  a  crime.  Railway  discrim- 
ination is  certainly  practiced  occasionally,  and  probably 
frequently,  in  favor  of  trusts;  but  the  sensible  and  pro])er 
course  is  to  enact  and  enforce  such  laws,  to  create  sucli 
supervisory  pul)lic  officials,  and  to  enact  such  penalties, 
that  railways  will  either  be  prevented  from  this  criminal 
])ractice  or  that  their  own  interests  will  Ije  opposed  to  it. 
Abr)li<h  railway  discrimination  and  you  will  unquestionably 
lop  off  many  of  the  trusts;  and  every  abolition  of  such  a 
trust  is  good  riddance  to  bad  ru])bish.  It  relieves  us  of 
a  business  organization  that  is  not  only  a  fraud,  but  a  fail- 
trre  as  a  cheap  producing  and  distributing  organization,  for 
it  relies  on  the  favoritism  of  railway  discrimination  simply 
because  it  cannot  succeed  in  honest  competition.  But  to 
abolish  trusts  for  this  reason  would  be  the  height  of  folly. 


Trusts  and  Special  Privileges  195 

If  railway  discrimination  be  indeed  tlie  cause  of  trusts,  then 
it  would  seem  tliat  those  who  are  so  desirous  of  destroying 
trusts  would  proceed  at  once  to  remove  the  cause.  Abolish 
the  cause  and  the  result  will  cease.  Prevent  railway  dis- 
crimination, and  if  trusts  can  be  kept  up  only  by  discrim- 
ination in  their  favor,  then  trusts  will  go  down.  The  rail- 
ways of  the  country  are  corporations  that  in  their  nature 
are  peculiarly  subject  to  governmental  regulation  and  con- 
trol, for  they  not  only  owe  their  corporate  powers  to  the 
government,  but  an  implied  agreement  in  their  acceptance 
of  a  charter  is  that  they  will  act  as  common  carriers  serv- 
ing all  equally  and  impartially. 

It  is  charged  freely  that  trusts  are  built  up  and  sustained 
by  the  special  privileges  allowed  them  under  the  customs 
tariff;  that  if  these  restrictions  upon  free  trade  were  re- 
moved, many  prices  that  are  now  exorbitant  would  at  once 
be  reduced.  Is  this  true?  There  can  be  no  question  that 
a  tariff  means,  for  a  time,  higher  prices.  The  American 
tariff  is  based  upon  the  fact,  real  or  supposed,  that  our  for- 
eign competitors,  by  reason  of  more  poorly  paid  labor,  are 
able  to  produce  and  sell  at  a  lower  price.  Its  purpose  is 
to  protect  our  home  industries  from  the  cheaper  ])roducts 
of  countries  where  a  lower  standar.d  of  living  exists  among 
the  workingmcn.  There  has  probably  never  been  a  time 
when,  if  the  tariff  had  been  removed,  prices  of  many  oL" 
our  articles  would  not  have  fallm.  But  the  Ameri- 
can people,  aft(>r  almost  a  century  of  discussion  and  legis- 
lation upon  this  question,  and  after  experiments  with  high 
protective  tariff's  and  with  low  tariff's  im])osed  only  fcr 
the  purpose  of  raising  revenue,  have  decided  that  their 
prosperity  and  welfare  are  fostered  by  the  maintenance  of 
the  higher  standard  of  living  that  characterizes  America, 
and  by  the  holding  out  of  incentives  to  the  estal)lisli- 
ment  of  factories  and  to  the  building  up  of  industries;  and 


196  The  Trusts 

the  great  majority  of  them,  while  willing  to  concede  that 
conditions  are  fast  changing,  and  that  cheaper  capital  and 
inventive  talent  are  making  us  a  nation  of  such  abundant 
producers  that  our  greatest  need  is  a  foreign  market,  and 
that  our  tariff  schedules  must  from  time  to  time  be  changed 
and  our  policy  in  the  future  somewhat  altered,  still  believe 
from  experience  that  the  protective  policy  is  one  not  to 
be  lightly  or  rashly  cast  aside.  AVe  cannot  forget  the  de- 
pression and  stagnation  of  business  life  and  the  paralysis 
that  fell  upon  industry  only  a  few  years  ago  as  thj  result 
of  the  persistent  effort  to  remove  our  tariff  duties.  But 
the  American  people  are  not  in  favor  of  the  tariff  that 
fosters  monopoly.  ^Ye  will  not  abolish  a  tariff  merely  be- 
cause the  industries  that  have  sprung  up  under  it,  in  an 
excess  of  competition,  may  have,  at  some  time,  re- 
duced the  price  of  their  product  below  the  sum  that  is  rep- 
resented by  the  cost  of  production  in  Europe  plus  our  tariff. 
Such  a  reduction  in  the  price  is  prima  facie  evidence  that 
the  tariff  on  that  article  ought  to  be  reduced;  but  it  is  not 
conclusive,  any  more  than  the  price  at  a  ''  slaughter "'  sale 
is  evidence  of  fair  market  value.  If,  because  of  excessive 
competition,  the  selling  price  is  less  than  that  which  will 
afford  a  reasonable  profit  to  the  manufacturer  after  paying 
American  wages  to  his  employees,  and  if  afterwards  a  com- 
bination of  these  manufacturers  restores  the  price  only  to 
the  fair  profit  mark,  we  do  not  intend  to  abolish  the  tariff, 
which  alone  enables  them  to  obtain  this  profit  and  to  pay 
these  wages.  But,  on  the  other  hand,  if  the  tariff  is  being 
used  to  permit  manufacturers  to  charge  a  price  one  cent 
in  excess  of  a  fair  profit  after  paying  American  wages, 
it  is  1)oing  used  not  to  build  up  American  industry, 
but  to  foster  a  monopoly.  Its  effect  is  not  to  aid  the 
American  workingmen,  but  to  plunder  the  American  peo- 
ple.   Sucli  a  tariff  is  a  monstrous  robbery,  and  none  will  be 


Trusts  and  Special  Privileges  197 

quicker  to  lower  it  or  to  abolish  it,  if  need  be,  than  those 
who  I'or  years  liave  voted  for  taritl's  that  wdl  be  a  protection 
to  our  nianul'actui'ers  and  a  safeguard  for  American  work- 
men ami  a  cause  of  prosperity  to  the  whole  American  peo- 
ple. The  subject  of  the  tariff  and  the  trusts  is  so  im- 
portant that  it  will  be  considered  in  a  later  chapter,  but 
this  much  may  properly  be  said  here,  while  we  are  con- 
sidering the  elfects  of  special  })rivileges  upon  trusts:  if 
the  tariit  is  building  up  monopolistic  trusts  which  are 
charging  the  American  people  prices  that  yield  undue 
profits — and  it  is  possible  that  a  number  of  trusts  are  thus 
built  up  and  sustained — then  one  way  to  tear  down  the 
trusts  is  to  reduce  or  abolish  this  tarilf.  To  prohibit  trusts 
tiiemselves  for  this  reason  would  be  to  imitate  the  Dutch- 
man who,  to  rid  his  barn  of  the  rats,  burned  it.  But  if 
ym  abolish  the  tariff  only  in  those  cases  Avhere  trusts  are 
using  it  to  exact  exorbitant  prices,  beyond  the  fair  profit 
mark  even  after  paying  American  wages,  not  only  will 
you  prol)ably  kill  many  trusts,  but  if  any  are  left,  you  will 
know  that,  in  so  far  as  the  tariff  is  concerned,  they  are 
winning  on  their  merits,  because  economically  superior. 

Again  it  is  said  that  trusts  derive  their  strength  and 
power  from  their  possession  of  pid)lic  utilities, — for  instance 
that  the  Standard  Oil  Com})any  owes  much  of  its  strength 
to  its  ao((uiring  the  pi})e  lines,  which  are  in  reality  a  means 
of  transportation  akin  to  the  railway;  and  that  myriads 
of  corporations,  such  as  telephone,  tc'legraph,  electric  light, 
and  gas  companies,  and  scores  of  others,  owe  all  thoir 
strength  to  the  ])()ssessi()n  of  franchises  in  the  public  streets 
of  cities  and  villages  and  in  rural  highways,  and  to  rights 
of  way  acquired  l)y  an  exercise  of  the  right  of  eminent 
domain,  and  to  other  ])ul)lic  utilities.  As  to  this  there  is 
not  a  partick'  of  doubt.  Thousands  of  companies  are  mon- 
opolies l)et-ause  possessing  these  utilities.     But   the   ques- 


198  The  Trusts 

tion  of  public  franchises  and  public  utilities  should  never 
be  confounded  with  industrial  trusts.  The  existence  of 
trusts,  as  a  class  of  industrial  organizations,  should  no  more 
be  made  to  depend  upon  things  done  by  them  by  virtue  of 
their  possession  and  control  of  puldic  franchises,  than 
should  the  existence  of  an  individual  be  made  to  depend 
ujjon  things  done  by  him  by  virtue  of  a  patent  right  held 
In'  him  in  an  invention.  Public  utilities  belong  to  the  pub- 
lic. Public  franchises  are  public  property.  If  under  our 
existing  political  and  social  and  industrial  system,  our  mu- 
nicipalities and  state  or  national  governments  cannot  suc- 
cessfully manage  these  properties,  it  by  no  means  follows 
that  they  should  treat  them  as  worthless  property.  Public 
franchises  should  never  be  given  away.  At  the  most,  they 
should  be  temporarily  granted  to  the  person  or  corporation 
who  will  pay  to  the  people  the  most  for  their  use,  and  who 
will  guarantee  to  the  people  the  most  efficient  service.  In 
every  grant  or  lease  of  them  there  should  always  be  a  reser- 
vation of  the  control  of  the  public.  Public  franchises  are 
generally  in  their  very  nature  monopolies.  He  who  ac- 
Cjuires  them  knows  that  competition,  even  if  possible,  is 
impracticable.  Their  possession  does,  indeed,  give  one  the 
power  to  exact  a  price  for  the  service  to  be  rendered,  which 
is  based  not  upon  tlie  cost  of  tbe  service,  but  upon  the  fact 
that  it  can  ])e  rendered  by  only  one,  or,  at  the  most,  by  a 
very  limited  number.  If  the  industrial  trusts  owe  their 
power  and  strength  to  the  possession  of  public  utilities  and 
public  franchises — as  doubtless  some  do — the  evil  lies  not 
so  much  in  tbe  trusts  themselves  as  in  the  people  who 
liave  .-(luandered  their  valuable  assets, — the  people  who, 
beeau-e  of  some  fancied  ultimate,  indirect  Ijenefit  to  the 
])eople,  have,  lik(;  Hsau,  sold  their  birthright  for  a  mess  of 
])Ottage.  Tlie  n'luedy  is  for  the  ])eople  to  come  again  into 
their  own:    to  hold  all  that  tliey  still  retain  in  the  way  of 


Trusts  and  Special  Privileges  199 

v;ilua])lo  franchises:;  and,  as  time  goes  on,  to  ro-acquire  ,-nch 
of  iluMM  a>  can  lionorably  he  re-taken;  to  ini{)Ose  fair  and 
C(|uitahle  taxation  upon  these  valuahle  pro[)erty  rights, 
just  as  other  ]iroi)erty  is  taxed  and  just  as  (iovernrr  ]\oose- 
v(dt  and  the  State  Tax  Coniniissioners  of  New  York  are 
striviiig  to  do  in  tliat  state,  through  their  strenuous 
and  gaUant  elforts  to  enforce  tlio  provisions  of  the  Fran- 
chise Tax  Law  whicli  was  introduced  l)y  Senator  John 
Ford.  Furthermore,  every  effort  shouhl  be  matle  to  exact 
and  rcMpiire  of  every  corporation  rendering  public  service,  a 
fulfillment  of  every  agreement  and  obligation,  express, 
implied,  or  assumed.  Re-gain  these  public  utilities  and  tax 
these  public  franchises,  and  require  the  fulfillment  of  cor- 
poration obligations,  and  y(ni  will  scotch  the  snaky  trust,  as 
well  as  destroy  thousands  of  local  monopolies. 

Akin  to  the  possession  of  ])ublic  franchises,  is  the  posses- 
sion of  products  which  exist  only  in  limiLed  quantities, 
such  as  most  of  our  metals  and  minerals.  This  is  the  pos- 
session of  a  natural  monopoly.  Some  of  our  most  exacting 
monopolies  are  based  upon  the  control  of  practically 
the  entire  quantity  of  these  products.  The  anthracite  coal 
pool  is  an  instance.  All  of  the  anthracite  coal  of  the 
T'nited  States  is  found  in  a  comparatively  small  area,  and 
to-day  it  is  nearly  all  in  the  practical  possession  of  the 
seven  great  railway  comjianies  which  traverse  the  coal 
fields.  The  output  of  coal,  its  price,  and  nearly  every 
detail  connected  with  the  mining,  the  transjiortation,  or 
the  selling  of  it,  is  determined  each  month  at  a  meeting 
of  the  chief  sales  agents.  About  the  only  limit,  to-day, 
u[)on  the  existence  of  what  would  otherwise  be  a  pitiless 
and  mercilesi  monopoly  in  coal,  is  the  enormous  amount  of 
])ituminous  or  soft  coal  which  is  scattered  all  over  the 
country.  Rut  comjianies  are  in  existence,  and  others  are 
being  formed,  which  are  of)taining  possession  of  vast  areas 


200  The  Trusts 

of  our  bituminous  coal  fields,  or  the  means  of  transporta- 
tion from  them;  also  of  our  richest  copper  mines;  also  of 
the  richest  deposits  of  iron  ore.  If  our  industrial  trusts 
are  able  to  obtain  possession  of  coal  and  the  metals  and 
minerals  which  are  found  in  limited  quantities,  the  mon- 
opolistic powers  which  they  have  are  due  partly  to  their 
great  wealth,  but  chiefly  to  their  possession  of  these  natural 
monopolies.  If  by  limitation  of  capital — and  in  that  way 
only — we  can  save  ourselves  from  monopoly,  then  let  us  by 
all  means  limit  the  capital,  for  monopoly  is  a  curse  in  every 
way.  But  the  danger  suggests  even  deeper  thoughts,  and 
causes  one  to  wonder  if,  perhaps,  the  proper  step  to  rem- 
edy the  evil  might  not  be  to  limit  the  extent  of  the  power  of 
acquiring  these  natural  monopolies.  Many  of  the  consti- 
tutions of  our  states,  even  those  of  some  of  our  most  con- 
servative eastern  states,  for  a  long  time  contained  clauses 
which  reserved  to  the  state  the  ownership  of  all  gold 
mines.  We  do  not  know  whether  Pennsylvania  has  such  a 
clause  in  her  constitution,  although  Xew  York  for  a  long 
time  did,  but  if  Pennsylvania  has,  it  would  be  far  more 
sensible  for  her  to  have  a  clause  reserving  to  herself  the 
ownership  and  control  of  her  coal  mines,  because  they  not 
only  lie  at  the  foundation  of  all  her  great  industries,  but 
furnish  to  the  country,  one  of  life's  necessities, — the  means 
of  heating  our  homes  and  places  of  business.  But,  of 
course,  this  would  be  socialistic.  It  should,  lioMTever,  be 
borne  in  mind  that  in  the  case  of  the  anthracite  coal,  thj 
monopoly  has  been  acquired  by  companies  in  league  with 
the  railway  companies  traversing  the  coal  fields.  If  com- 
mon carriers,  chartered  and  incorporated  for  the  purpose 
of  carrying,  and  for  that  purpose  only,  could  ))e  restricted 
to  tiie  exercise  of  these  functions  and  to  the  ]:)erformance  of 
these  duties;  if,  furthermore,  discrimination  by  them  in 
favor  of  certain  miners  could  be  prevented,  the  practical 


Trusts  and  Special  Privileges  201 

difficulty  would  largely  bo  solved.  We  would  find  that  our 
coal,  our  metals,  and  our  minerals  are  so  widely  scattered 
that  attempts  to  monopolize  them  would  be  far  more  diffi- 
cult; perhaps,  impracticable. 

Xot  a  few  of  our  trusts  owe  their  strength  and  power 
and  existence  to  the  posv^ession  of  valuable  patent  rights. 
Patents  are  legal  monopolies, — made  so  by  law  and  pro- 
tected by  all  the  force  and  power  of  law.  The  great  ma- 
jority of  the  people  of  this  countr}'  firnily  believe  in  the 
wisdom  of  encouraging  inventive  talent,  ])y  holding  out  the 
reward  of  the  exclusive  right  for  a  limited  period  to  make, 
use,  sell,  and  vend  a  newly  invented  article,  ^lost  of  us 
believe  that  the  great  industrial  progress  of  this  nation  is 
due  to  the  labor-saving  inventions  which  a  generous  system 
of  patent  law  has  called  forth.  But  if  our  trusts  are  being 
built  up  upon  patents— if  by  hook  and  crook  they  are  being 
perpetuated  long  beyond  the  period  of  seventeen  years, 
which  a  patent  is  supposed  to  run — as  a  number  of  our 
most  oppressive  trusts  are,  then  the  sensible  remedy  is  a 
change  in  our  patent  laws  rather  than  any  attempt  to  stop 
that  which,  if  changes  in  the  patent  laws  were  made,  would, 
))erbaps,  stop  themselves.  Modify  tlie  patent  laws  and  you 
will  wipe  out  many  of  the  most  exacting  trusts  in  the 
world  and  shear  others  of  their  power,  without  lessening 
the  incentive  to  the  poor  but  ingenious  inventor. 

There  is  another  phase  of  the  question  of  trusts  and 
special  privileges  which  should  not  be  overlooked.  It  is 
the  political  rather  than  the  industrial  phase.  The  great 
special  privileges  which  may  be  obtained  by  corporations 
or  by  persons  of  great  wealth  are  temptations  to  them  to 
use  every  means  to  obtain  them.  The  prize  is  great  and 
cupidity  is  sorely  tempted.  It  is  not  strange  that  in  order 
to  obtain  these  privileges,  to  secure  high  tariffs,  to  induce 
railroad  officials  to  offer  secret  rebates  or  cut  rates  or  special 


202  The  Trusts 

favors,  to  persuade  aldermen  and  the  members  of  common 
councils  to  grant  franchises  in  public  streets  or  to  enter 
into  valuable  contracts  for  services  to  the  public,  and  to 
influence  legislators  to  vest  persons  with  peculiar  powers 
and  privileges, — men  should  yield  to  the  temptation  to  pay 
out  large  sums  of  money  directly  or  indirectly  as  bribes. 
The  best  remedy  is  for  public  sentiment  to  set  itself  against 
granting  to  any  person  or  set  of  persons  special  privileges 
of  any  kind.  Charters  of  incorporation  should  be  granted 
under  general  and  not  special  statutes.  Public  franchises 
should  be  leased  or  temporarily  granted  only  after  competi- 
tive bidding.  Tariffs  should  be  determined  and  fixed  in 
accordance  v/ith  government  statistics  as  to  cost  of  produc- 
tion, cost  of  living,  wages,  etc.,  both  at  home  and  abroad. 
Furthermore,  bribery  should  be  punished  with  the  severest 
penalties,  and,  above  all,  the  moral  tone  of  the  people  should 
be  '^levated  and  purified,  so  that  bribery  and  corruption 
might  never  find  even  an  apologist.  But  bribe  givers  are 
by  no  means  limited  to  trust  agents  or  their  officers.  In 
*'  Wealth  Agcmist  Commonweallh"  there  are  many  chapters 
which  seek  to  prove  bribery  by  the  Standard  Oil  Compan3^ 
Two  instances  come  to  mind, — one  an  alleged  attempt  to 
bribe  oil  inspectors  to  approve  oil  which  fell  below  the 
standard  fixed  as  the  flash  point;  the  other  an  attempt  to 
bribe  certain  city  officials  to  oppose  municipal  ownersliip 
of  a  natural  gas  plant.  But  in  my  lifetime  1  have  more 
than  once  heard  of  small  local  milk  dealers — not  great, 
greedy  consolidated  corporations — who  owned  hardly  more 
than  one  horse  each  and  a  milk  wagon  and  a  few  cans  and 
a  few  cows,  who  attcmjitcd  to  brilie  local  milk  inspectors 
to  approve  milk  that  was  below  the  standard  of  purity; 
and  it  will  be  admitted  that  there  are  instances  innumer- 
able in  wliich  private  individuals  have  offered  petty  In-ibes 
to  aldermen,  members  of  common  councils,  and  legislators. 


Trusts  and  Special  Privileges  203 

To  abolish  all  trusts,  l)ccause  of  any  attempt  which  oilicers 
of  the  Standard  Oil  Company  might  have  made  to  bribe 
oil  inspectors,  would  be  as  foolish  as  it  would  be  to  decree 
that  henceforth  milk  should  not  be  peddled  through  a  city 
street  by  milk  peddlers,  but  should  be  sold  only  at  farms, 
because  some  milk  peddler  has  bribed  the  milk  inspector. 
^Yho,  in  fact,  is  the  worst  sinner — the  bribe  giver  or  ihe 
bribe  taker?  If  the  legislator  sometimes  has  been  tempted 
to  accei't  a  bribe,  is  it  not  well  known  that  not  infrequently 
the  legislator  holds  up  good  measures  in  order  to  secure  a 
bribe  as  a  consideration  for  withdrawing  his  opposition?  If 
the  Standard  Oil  Company,  or  any  other  company,  has,  in- 
deed, bribed  a  pul)lic  olFicial,  and  if  for  that  reason  trusts 
should  bo  abolished,  why  should  not  public  oflicials  be 
abolished?  Common  sense  suggests  that  briljery  and  the 
bribe  giver  and  the  bribe  taker  should  be  punished,  but 
not  that  industry  should  be  stifled. 

By  all  means,  let  us  stop  this  granting  of  special  privi- 
leges, this  prodigal  giving  away  of  franchises,  this  surren- 
der of  public  utilities,  this  pampering,  now  and  then,  of 
over-fed  industries  with  tariffs  that  are  excessive  ratlier  than 
protective,  this  iniquitous  railway  discrimination,  this  cat- 
ering to  the  few  out  of  the  store-house  of  the  public.  Let 
us  stop  this  business  of  favoritism.  If  we  do,  trusts  by  the 
score — perhaps  by  the  hundred — will  tumble  down  like  a 
child's  house  of  cards.  Let  us  also  prevent  over-capitaliza- 
tion and  corporate  mismanagement — let  us  take  away  all 
the  chance  of  the  insiders  rnbl)ing  tlie  outsider--,  of  the 
majority  betraying  the  interests  and  wrecking  the  property 
of  the  minority.  Let  us  call  '"cut-throat"  competition, 
what  it  is,  '■'conspiracy;"  and  punisli  it  accordinglv;  and 
l"t  us  also  make  ]nib]ic  all  those  atTairs  of  corporations 
which  affect  tlie  public.  If  tlien  there  is  any  trust  left,  it 
probably  will  be  an  institution  of  economic  superioritv, — • 


204  The  Trusts 

able,  at  least,  to  produce  and  distribute  more  cheaply  than 
any  one  else.  Does  the  person  who  would  abolish  all  trusts 
by  one  universal  flat,  by  one  sweeping  prohibition  of  all 
C(jmbinations  of  competitors,  think  that  the  steps  just  pro- 
posed are  likely  to  be  insufficient  or  ineffective,  or  that  they 
are  half-hearted,  shrinking  attacks  on  trusts?  AVe  ask 
him,  then,  in  the  first  place,  to  answer  candidly:  "  How 
many  trusts  can  you  think  of  that  would  be  apt  to  remain 
if  all  the  remedies  suggested  above  were  adopted  and  ap- 
plied? Would  not,  in  your  opinion,  a  very  large  number 
of  the  trusts  be  abolished?  Would  not  the  majority  of 
trust  evils  be  suppressed?"  Are  such  remedies  inef- 
fective? Let  us  ask  you  again:  "Do  you  think  any 
remedy — absolute  prohibition,  government  license,  or 
anything  else — will  be  effective  if  trusts  are  not 
shorn  of  these  special  privileges,  if  they  are  not  compelled 
to  submit  to  greater  publicity,  if  corporate  management  is 
not  required  to  bo  faithful,  if  the  strong  and  powerful  in 
the  struggle  of  competition  arc  not  compelled  to  fight  fair? 
I  lave  your  laws,  national  or  state,  which  have  absolutely 
forbidden  trusts,  which  have  declared  trust  owners  crimi- 
nals, and  have  threatened  them  with  heavy  fines  and  long 
imprisonment, — have  these  been  effective?  How  many  loss 
trusts  are  there  since  1890 — ten  years  ago — when  you 
passe  \  the  Federal  statute,  the  Sherman  act,  forbidding 
them?  Four  years  ngo  twenty-two  states  had  placed  trusts 
under  tlie  ban.  Fine  and  imprisonment,  and  practical  out- 
lawry, were  the  penalties,  yet  nine-tenths  of  the  trusts  have 
boon  formed  since  then.  Your  laws  have  not  been  success- 
ful. Was  it  because  they  were  not  in  harmony  with  eco- 
nomic laws,  because  they  were  not  in  step  with  the  prGgre.*s 
of  the  world,  liooause  they  "  did  protest  too  much."  because 
you  did  not  ronlize  that  you  could  not  SKCce-sfnlly  wrestle 
with  the  giant  tz-usts  as  long  as  you  kept  feeding  thpin  on 


Trusts  and  Special  Privileges  205 

special  privileges?"  Do  you  think  you  can  count  the  num- 
l)er  of  slaughtered,  if  you  really  and  truly  and  earnestly  try 
these  methods  of  extermination?  Are  the  remedies  half- 
hearted, or  timorous  attacks?  Ti-y  them  and  sec.  Plenty 
of  people  have  beaten  drums  and  blown  trumpets  and  put 
through  laws,  forever  and  utterly  abolishing  trusts, but  they 
did  not  abolish.  Trusts  are  very  little  more  afraid  of  those 
laws  than  they  would  be  if  you  should  cry,"BoohI"at  them. 
But  if  you  intend  to  enlist  in  the  tight  against  special  privi- 
leges in  all  its  forms,  you  do  not  want  to  be  chicken-livered; 
and  it  is  no  ninety  days'  campaign,  and  no  picnic  war. 
Are  t"  proposed  remedies  a  shrinking  method  of  attack? 
Well,  take  away  all  the  special  privileges,  all  tlie  chances 
for  over-capitalization,  all  corporate  mismanagement,  all 
unfair  competition,  and,  while  there  may  be  some  evils  left, 
yet  the  trust  problem  will  shrink  to  such  small  proportions 
that  we  can  dispose  of  the  rest  of  it  under  the  order  of  un- 
finished business. 

It  is  often  said  that  the  trusts  are  so  hig  that  they  have 
obtained  control  of  the  railways  and  other  means  of  trans- 
portation, of  the  public  franchises  and  utilities,  and  of  the 
patent?;  and  that  the  tarilTs  are  made  by  them  and  for  iliem; 
and  that  in  competition  with  them  the  struggling  com- 
petitor is  stricken  down  })y  a  giant's  hand.  Is  not  the 
true  statement  that  the  trusts  are  so  big  hecausc  they  have 
obtained  control  of  the  railways  and  other  means  of  trans- 
portation, the  pul)lic  ti'anchises.  ])ubli('  utilities,  etc.?  Rail- 
way discrimination  liegan  before  trusts.  The  Standard  Oil 
Company, — the  tlrst  of  the  trusts  and,  according  to  ifenry 
I).  Lloyd,  the  successor  of  the  South  Improvement  Com- 
pany which  inad(^  a  deal  with  the  railways  whereby  its  oil 
was  to  be  carricil  at  about  half  the  rate  charged  its  rivals, 
tlie  diiference  to  be  given  to  the  South  Improvement  Com- 
jiany, — came  inte)  being  after  this  manifestly  unfair  agree- 


2o6  The  Trusts 

ment,  and  not  before.  If  it  is,  indeed,  the  successor  of  the 
South  Improvement  Company,  one  can  have  little  doubt 
after  reading  the  reports  of  courts,  investigating  com- 
mittees, and  the  Interstate  Commerce  Commission,  that  it 
came  not  only  after  this  iniquitous  agreement,  but  as  a  re- 
sult of  it  or  of  an  agreement,  express  or  understood,  of  sim- 
ilar purport.  Of  course  these  things  are  more  or  less  re- 
ciprocal. All  concerns  seek  the  privilege,  but  the  big  con- 
cern is  more  apt  to  get  it;  the  privilege  results  in  work- 
ing up  the  big  concern, — the  trust.  The  appetite  does, 
indeed,  grow  upon  what  it  feeds.  However,  if  there  is  any 
uncertainty  as  to  which  comes  first,  the  trust  or  the  privi- 
lege, this  much  is  certain,  destroy  the  privilege  and  you 
destroy  the  trust  based  uj)on  it. 

The  remedies  proposed  are  natural.  They  tend  not  to- 
wards socialism,  but  away  from  it.  They  straighten  things 
out  and  clear  away  obstacles  and  ieave  a  clear  track 
for  some  good,  free,  liealthy  individualism.  They  do  not 
whimper  of  paternalism,  they  do  not  savor  of  governmental 
interference.  They  are  good  remedies  because  they  seek 
to  reach  first  causes.  They  are  potent  remedies  not  only 
for  the  economic  evils,  but  also  for  the  political  evils  of 
trusts.  Tlie  special  privik'gcs  which  it  is  possible  to  secure 
t(?mpt  the  trusts  to  bribe,  quite  as  often  and  quite  as  much 
as  trusts  tiy  l)ril)ery  tempt  legislatures  to  create  and  bring 
into  b(;ing  some  new  form  of  privilege. 

'^^riie  remedies  here  })roposcd  are  also  sim[)lc,  economic 
nnd  [iractical.  'i'licy  restore  things  where  they  were,  where 
flicy  were  meant  to  be,  and  where  they  c)ught  to  be.  Tlwy 
leave  I  he  fight  of  competition  to  go  on  upon  its  merits, 
'^riiey  stoj)  f;ike  (■()ntest>.  '^Ihey  leave  trusts  free  to  foiTU 
and  free  to  act,  if  Ihey  form  naturally  and  act  pi'operly, 
and  in  aeeordiuice  with  su(di  laws  as  may  be  enacted  for 
their    I'eguliiliou    and    (control.      'J'hey    leave    the    United 


Trusts  and  Special  Privileges  207 

States  free  to  adopt  the  greatest  and  most  perfect 
industrial  organizations,  to  use  in  its  contest  for 
the  world's  industrial  supremacy;  and,  on  the  (jthor 
hand,  free  to  regulate,  control,  restrict,  or,  if  found 
necessary,  to  abolish;  but  they  also  leave  each  and 
every  citizen  of  the  United  States,  poor  as  well  as  rich,  a 
fair  field  and  a  free  fighting  chance  and  the  fullest  oppor- 
tunity by  his  own  individual  efforts  to  win  for  himself  suc- 
cess, prosperity  and  wealth.  They  can  certainly  accomplish 
an  immense  amount  in  correcting  trust  evils.  If  they  are 
not  sullicient,  they  do  not  prevent  the  use  of  suptjle- 
mentary  remedies;  and  they  are  equally  sure  to  add  to  their 
potency. 


CHAPTER  XL 

PROMOTION,     OVER-CAPITALIZATION,     AND     PUBLICITY, 

OR 
WIND,  WATER,  AND  LIGHT. 

Under  normal  economic  conditions  comparatively  few 
individual  enterprises  would  amalgamate  except  when  such, 
a  step  would  result  in  greatly  increased  economy  in  con- 
ducting business.  Owing  to  the  natural  preference  of  every 
one  to  be  at  the  head  of  his  own  business  concern, 
people  generally  are  not  desirous  of  sinking  their  individu- 
ality in  grefit  corporations.  The  business  which  has  been 
built  up  by  a  man,  is  often  prized  by  him  because  it  is  a 
thing  of  his  own  creation.  The  business  that  is  handed 
down  from  father  to  son,  and  to  the  son's  son,  is  an  heir- 
loom with  which  men  do  not  like  to  part.  With  the  excep- 
tion of  the  few  who  for  personal  reasons  desire  to  retire 
from  active  business,  sales  of  "  going  "  and  successful  busi- 
ness enterprises,  especially  of  a  manufacturing  character, 
are  comparatively  few.  Unless  paid  a  sum  in  excess  of 
its  fair  worth,  it  is  usually  when  a  person  becomes  con- 
vinced that,  because  of  excessive  competition,  he  is  abso- 
lutely sure  to  fail  in  business,  that  he  will  consolidate 
witli  others,  hoping  in  the  union  of  the  weak  to  find 
strenirtli.  If  only  ordinary  business  considerations  pre- 
vailed, if  there  were  not  other  insidious  influences  at  work, 
we  should  find  that  trusts  and  combinations  and  consolida- 
tions ^^I'vo  the  symptoms  of  liad  times,  and  the  signs  of 
financial  distress,  and  we  should  expect  to  see  them  most 

20S 


Over-Capitalization  and  Publicity        209 

frequently  formed  during  periods  of  business  depression. 
It  is  undoubtedly  true  that  the  early  combinations  were 
brought  into  existence  by  such  conditions,  and  that,  even 
to-day,  many  of  the  trusts  are  combinations  of  capital  on 
the  defensive  which  have  adopted  this  method  of  organiza- 
tion a5  a  means  of  salvation  from  impending  ruin  and 
bankruptcy.  But  the  facility  and  ease  with  which  shares  of 
stock  are  bought  and  sold  upon  our  stock  exchanges,andthe 
immense  possibilities  of  acquiring  riches  rapidly,  especially 
by  those  who,  having  control  of  corporate  companies,  are 
fully  acquainted  with  their  financial  condition,  resources 
and  possibilities,  and  even  more  especially  by  those  who, 
being  in  control  of  these  great  companies,  are  willing  for 
the  sake  of  gain  unscrupulously  to  manipulate  the  affairs 
of  the  companies  entrusted  to  their  care, — these  things 
have  brought  it  about  that  as  an  actual  fact,  the  great  ma- 
jority of  trusts  that  are  to-day  formed,  are  organized  ap- 
parently for  purposes  of  manipulation  rather  than  manu- 
facturing. 

It  is  significant  that  most  of  our  trusts  now  in  existence 
wore  fornuHl  in  the  recent  years  of  unparalleled  prosperity, 
instead  of  in  the  years  of  adversity.  They  seem  to  be  a 
result  of  good  times  and  Ijuoyaney  and  confidence,  although 
]io.-sibly  they  are  reciprocally  a  cause  of  such  conditions. 
Jt  can  hardly  l)e  claimed  that  tliov  are  the  result  of  the 
old  years  of  depression  beginning  with  IS'lo,  notwithstand- 
ing the  trying  times  of  tliat  })anic  clearly  showed  business 
men  the  awful  cost  of  the  wasteful  methods  of  competition 
and  the  savings  of  eo-operation  and  combination.  It  is 
doubtless  true  that  few  of  the  trusts,  to-day,  are  formed 
withmit  the  organizers  being  jiarily  influenced  by  the  pos- 
sibilities of  more  economical  {u-oduction  and  distribution 
which  the  new  form  of  organization  oll'ers,  yet  it  is  even 
more  certain  thai  a  verv  laruv  number  of  the  trust  orr^ran- 


2  10  The  Trusts 

izers  are  actuated  by  other  motives, — by  the  opportunities 
of  unloading  their  over-valued  properties  on  innocent  in- 
vestors, by  possibilities  of  stock  manipulation  and,  in  many 
cases,  by  the  apparent  ability  to  obtain,  at  least  tempora- 
rily, a  monopoly, — all  of  these  motives  leading  to  methods 
and  practices  which  are  unscrupulous,  if  not  criminal,  and 
which  result  in  swindHng  the  investing  public,  in  betray- 
ing and  defrauding  the  minority  stockholders,  in  impair- 
ing public  confidence,  in  unsettling  the  financial  condition 
of  the  country,  and  in  attempts  to  obtain  undue  profits 
and  to  exact  extortionate  prices.  The  great  evil  of  trusts 
to-day — the  great  source  of  their  evil — is  trust  promo- 
tion, and  the  ways  and  means  that  it  adopts  and  the  prac- 
tices that  it  occasions. 

Trust  promotion  is  a  new  industry  that  has  sprung  up  in 
recent  years.  The  combinations  that  are  to-day  made 
})y  business  men  are  by  no  means  always  prom^pted  by  the 
business  men  themselves.  They  are  suggested,  inspired, 
nourished,  and  fostered,  as  a  rule,  by  men  who  have  no 
connection  whatever  with  the  business  enterprises, — by 
the  trust  promoters.  The  profits  of  trust  promoters  have  in 
many  cases  been  almost  fabulous.  It  was  at  one  time  ru- 
mored that  the  promioters  of  the  American  Steel  and  Wire 
Company  received  $15,000,000  in  stock  for  their  services 
in  organizing  that  company.  While  this  was  very  likely 
an  exaggeration,  it  is  a  fact  that  in  Xovember,  1898,  one 
Oerritt  JI.  Ten  Broeck  of  St.  Louis,  sued  John  W.  Gates 
and  p]ll)ert  11.  Gary  for  $1,875,000  cash,  the  amount  which 
ho  claimed  he  would  have  received  for  ])romoting  this 
company  had  he  not  been  displaced  by  others;  and  yet 
'J'en  J^jTDeck  was  to  get  but  one-half  the  profits.  It  has 
also  b(;eii  widely  reported  that  one  of  tlie  most  successful 
of  the  irrcate.-t  trust  promoters  ha>  within  tlie  y)ast  two 
years,  or  thereabouts,  received   between   $30,000,000  and 


Over-Capitalization  and  Publicity        211 

$-10,000,000  in  stocks  for  his  work  in  or<i^anizing  trusts, 
and  that  doiluctiii;^:  his  exj)onses  in  securiiii^  options  and 
charters  and  '"divvinii:"  up  with  others,  he  has  probably 
realized  at  tlie  market  value  of  the  stocks  received  by  him, 
about  $10,0()(),()00.  It  is  said  that  the  promoter  of  the 
American  Tin  I'late  Company  received  coniuKm  stock  of 
the  company,  which  was  actually  worth  about  $4,000,000, 
and  the  par  value  of  which  was  $10,000,0U0;  while  the 
])romoters  of  the  American  Steel  and  Hoop  Company,  the 
Republic  Iron  and  Steel  Company,  and  the  National  Tube 
Company,  are  also  said  to  have  received,  in  each  case, 
$5,000,000. 

Trust  promotion  of  this  kind  is  made  possible  only  by 
ovcr-ca})italization.  Abolish  over-capitalization,  and  the 
proniotint^  business  would  fall  fiat.  Put  an  end  to  the  ])ossi- 
bility  of  nuikini,r  great  fortunes  through  the  sale  of  watered 
stock,  and  not  one-half  as  many  trusts  would  be  formed. 
It  is  usually  by  giving  to  the  owners  of  the  several  plartts 
their  actual  value,  either  in  cash  or  in  bonds  secured  by 
mortgage  or,  at  least,  in  preferred  stock,  and  then  by 
giving  them  in  addition  large  amounts  of  common  stock 
as  a  l)onus. — paying  them  twice  over,  as  it  were,  for  their 
plants, — that  the  trust  promoter  induces  the  various  owners 
of  the  plants  to  part  with  their  property.  Paying  them  this 
extravagant  price,  the  promoter  and  those  associated  with 
him  can  make  profits  only  by  soiling  the  stock  to  the  public 
at  a  high  jtrico.  CoTieoalnient  of  the  truth  and  misrepre- 
sentation thus  become  necr'ssary  to  the  success  of  their 
plan.  Furthnr  to  give  the  stock  an  apparent  value  they 
either  have  to  mako  it  earn  dividends  which  are  based  on 
extortionate  prices,  or  else  to  declare  dividends  which  are 
never  earm^l.  Tlu^  tola!  nominal  capitalization  of  the 
various  incorjvirnted  trusts  in  the  T'nited  States  to-day  is 
about  $7,500,000,000,  but  the  host  estimates  arc  that  the 


212  The  Trusts 

actual  capital  is  much  less  than  one-half  that  amount. 
This  shows  the  amazing  amount  of  over-capitalization  in 
the  aggregate.  Probably  there  is  not  a  single  trust,  the 
capitalization  of  which  is  not  greatly  in  excess  of  the  actual 
value  of  its  tangible  assets;  and  there  are  comparatively 
few  whose  capitalization  is  not  in  excess  of  their  earnings 
at  fair  prices. 

A  typical  instance  of  the  way  in  which  modem  trusts  are 
formed  with  inflated  capital,  was  the  fish-packing  company, 
commonly  known  as  the  Menhaden  Trust.  Perhaps  no  better 
statement  as  to  the  manner  in  which  it  was  capitalized  can 
be  given  than  that  which  appeared  not  long  ago  in  Th$ 
New  York  Herald,  in  the  following  article: 

"MENHADEN   TRUST    PLANS. 


In  the  Jersey  City  Court  of  Chancery  yesterday  Vice-Chancellor 
Pitney  granted  an  order  which  is  the  first  step  toward  the  re- 
organization of  the  American  Fisheries  Company,  more  familiarly 
known  as  the  '  Menhaden  Trust.'  The  company,  which  has  a 
capital  of  $10,000,000,  iailed  recently  for  $190,000,  and  Tliomas 
Russell  and  Charles  Hobbs  were  appointed  receivers  by  the  New 
Jersey  Court  of  Chancery. 

Charles  Corbin,  as  counsel  for  the  receivers,  applied  to  Vice- 
Chancellor  Pitney  yesterday  for  an  order  authorizing  the  re- 
ceivers to  sell  the  property  of  the  company  and  to  borrow,  on 
receivers'  certificates,  $2'), 000  to  pay  insurance  premiums,  on  the 
plant,  now  due.  A  committee  of  stockholders  tcants  to  huy  in  the 
plant  at  no  more  tfmn  $200,000. 

Nathaniel  B.  Church,  who  was  general  manager  of  the  old  com- 
pany, testified  that  it  would  require  $100,000  to  man  and  equip 
the  company's  boats  and  get  them  ready  for  the  si^-ason's  fishing. 
The  Vice-Chancellor  asked  why  it  was  that  the  company's  capital 
was  so  large  when  it  required  only  a  comparatively  small  amount 
to  do  business  on. 

'Oil,  that's  the  Knglish  way,'  said  Mr.  Warren,  counsel  for  the 
English  shareholders. 


Over-Capitalization  and  Publicity        213 

'  Well,  you've  managed  to  fail  in  the  American  way,'  replied  the 
Vice-Chancellor." 

It  must,  liowever,  never  be  forgotten  that  so  great  are 
the  economies  of  production  on  a  large  scale,  so  enormous 
is  the  waste  of  competition  which  is  Siived  by  combination, 
that  properties  owned  and  managed  as  one  consolidated 
pro})erty,  are  inevitably  of  much  greater  value  than  when 
run  independently.  The  Standard  Oil  Company  is  to-day 
capitalized  for  something  in  excess  of  $100,000,000,  but  its 
stock  sells  for  about  GOO  in  the  open  market.  For  several 
years  it  has  paid  dividends  averaging  thirty  per  cent,  and 
the  rate  of  dividends  is  to  be  considerably  raised  tliis  year. 
Notwithstanding  the  fact  that,  in  fixing  the  capitalization 
of  the  Standard  Oil  Company,  the  amount  was  placed  at 
a  sum  considerably  in  excess  of  the  appraised  value  of  the 
tangible  property — such  intangible  property  as  good-will, 
patents,  and  trade-marks  being  included  in  the  valuation — 
yet  in  so  far  as  earning  capacity  is  concerned,  the  Standard 
Oil  Company  is  under-capitalized  instead  of  over-capital- 
ized. If  we  assume  that  its  prices  are  somewhat  in  excess 
of  what  they  should  be  and  that  they  should  be  lowered, 
it  is  doubtful  if  even  at  the  probable  decreased  receipts, 
the  company  could  be  said  to  be  over-capitalized;  and 
we  must  not  lose  sight  of  the  fact  that  the  price  of  kero- 
sene oil  has  been  constantly  lessened  since  the  formation 
of  the  Standard  Oil  Company.  The  American  Sugar  Re- 
fining Company, — the  Sugar  Trust. — is  capitalized  for 
nearly  $75,000,000,  and  the  best  estimates  are  that  the 
actual  cost  of  the  property  is  not  over  a  third  or  a  fourth 
of  the  amount  of  the  capitalization.  Still,  until  recently 
the  company  has  paid  for  many  years  seven  per  cent  on 
its  preferred  stock  of  $3(),9(i8.000  and  an  average  of  twelve 
per  cent  on  its  common  stock  of  the  same  amount.  This 
dividend  paying  ability  is  certainly,  in  part,  at  least,  due 


214  The  Trusts 

to  the  economies  of  production.  It  may  also  be  partly 
due  to  the  imposition  of  extortionate  prices.  A  study  of 
prices  alone  will  tell  which;  but  the  excessive  capitaliza- 
tion furnishes  an  opportunity  for  concealing  the  real  ex- 
tent of  profits.  The  American  Tin  Plate  Company  is 
capitalized  for  $50,000,000,  $30,000,000  being  common 
stock  and  $20,000,000  being  preferred.  The  owners  of 
the  plants,  the  cost  of  replacing  which  has  been  estimated 
by  experts  as  $12,000,000,  received  $18,000,000  worth  of 
preferred  stock  and  $18,000,000  of  common;  $2,000,000, 
of  each  kind  of  stock  were  sold  to  the  public  in  order 
to  obtain  a  working  capital,  while  the  balance  of  $10,000,- 
000  went  to  the  promoter  of  the  scheme.  Mr.  Byron  W 
Holt,  in  his  article  on  trusts  in  The  Review  of  Reviews 
for  June,  1899,  computes  the  market  value  of  the  stock 
of  the  company  at  the  quotations  existing  at  that  time, 
namely,  forty  for  common,  eighty-five  for  preferred.  This 
would  make  $29,000,000  as  the  market  value  for  the  $50,- 
000,000  worth  of  stock  in  June,  1899;  but  he  quotes  ex- 
perts as  estimating  the  net  profits  of  the  company  for  that 
year  at  $5,000,000,  and  the  value  of  the  annual  output  at 
$20,000,000.  Another  instance  of  over-capitalization  men- 
tioned by  him  is  that  of  the  American  Felt  Company, 
capitalized  for  $5,000,000,  with  a  bonded  indebtedness  of 
$500,000;  he  estimates  that  the  cost  of  the  tangible  assets, 
will  not  cover  more  than  the  amount  of  the  bonds.  The 
American  8tecl  and  Wire  Company  is  capitalized  at  $90,- 
000,000,  $40,000,000  of  whicli  is  seven  per  cent  cumulative 
preferred  stock.  According  to  ]\Ir.  Holt,  Avho  has  made 
inquiry  into  the  matter,  the  actual  value  of  the  property 
does  not  exceed  $30,000,000,  and  is  probably  mucb  ler-s. 
Twice  the  actual  cost  of  all  the  important  plants  consoli- 
dated into  the  companies  was  paid  to  their  owners.  Yet 
it  was  reported  by  one  of  the  directors  of  the  cojnpany  tliat 


Over-Capitalization  and  Publicity         215 

the  yearly  net  earnin.ijs  of  the  company  would  he  $12,000,- 
000.  Thus  it  would  appear  that,  in  tlie  cases  cited,  while 
there  has  1)oen  an  excessive  capitalization  compared  with 
the  cost  of  the  tan<Tible  assets,  there  was  not  excessive 
capitalization  as  compared  with  earnings  and  dividend 
paying-  capacity.  The  question  at  once  su.ggests  itself, 
however,  whether  this  great  earning  capacity  is  the  result 
of  the  savings  of  combination  or  is  due  to  monopolistic 
control;  also  whether,  if  due  to  the  savings  of  combination, 
it  should  not  he  shared  to  a  greater  extent  with  the  public; 
also  what,  if  any,  effect  the  over-capitalization  itself  has 
had  upon  the  prices  that  were  charged. 

The  possible  evils  of  over-capitalization  are  many.  The 
chief  are,  first:  the  opportunity  and  temptation  to  deceive 
the  innocent  and  uninformed  investor;  second:  to  exact 
unduly  high  prices  in  order  to  pay  dividends  upon  the  ex- 
cessive capitalization, — this  partly  for  the  pairpose  of  ac- 
quiring the  dividends,  ])ut  eveti  more  frequently  in  order  to 
give  to  tlie  watered  stock  an  apparent  value  so  as  to  make 
it  easy  to  unload  it  upon  tlie  investing  public:  third:  the 
incentive  to  rash  speculation  in  stocks  by  officers  of  cor- 
porations, and,  incidental  to  tliis,  such  management  or  mis- 
management of  the  affairs  of  the  companies  entrusted  to 
tlnun,  as  will  arbitrarily  and  improperly  influence  the  mar- 
ket value  of  the  ^to(•ks  and  in  many  cases  alToct  their  actual 
value.  Let  us  consider  in  detail  these  evils  and  their  full 
effect  and  some  possilile  remedies  for  them. 

So  influential  a  journal  as  Tlip  Xnr  ^'orl-  Herald  has 
declared  editoriallv  that  over-capitalization  is  the  root  of 
nine-tenth.i  of  all  the  stock  manipulations  and  frauds  that 
are  practiced  upon  the  public.  "Bourke  Cochran,  in  his  ad- 
dress at  the  Chicne-o  Trust  Conference,  arcrued  that  over- 
capitalization tended  in  no  way  to  affect  prices.  According 
to  him,  whatever  be  the  capitalization,  the  owners  of  the 


2i6  The  Trusts 

company  will  endeavor  to  obtain  all  the  profit  that  they 
can  possibly  derive.  But  it  would  seem  as  if  the  great 
orator  overlooked  the  fact  that  excessive  capitalization  will 
stimulate  those  to  whom  the  stock  is  originally  issued,  to 
charge  high  prices  for  their  products  in  order  to  declare 
dividends  and  to  give  an  apparent  value  to  their  stock,  so 
that  they  may  sell  it  to  the  investing  public;  and  that  over- 
capitalization permits  the  imposition  of  excessive  prices 
and  the  earning  of  unduly  large  profits  without  its  becom- 
ing known  to  the  public,  because  of  the  profits  being  dis- 
tributed in  comparatively  low  dividends  upon  a  capitaliza- 
tion which  the  public  does  not  know  to  be  excessive.  This, 
however,  is  an  evil  which  could  be,  in  part  at  least,  cor- 
rected by  publicity. 

It  has  been  said  that  over-capitalization,  in  itself,  is  of 
little  consequence;  that  the  amount  of  stock  that  is  issued 
is  not  the  value  of  the  property  of  the  corporation;  that 
at  the  most  it  is  merely  the  opinion  of  those  mIio  issue  it, 
as  to  its  value,  present  or  prospective.  But,  in  fact,  it  is 
often  not  even  an  honest,  hona  fide,  well-founded,  or  rea- 
Bonablc  opinion.  A  certificate  for  one  sliare  of  stock  whose 
par  value  is  $100  is  a  statement  that  it  represents  property 
worth  at  some  time,  in  some  one's  opinion,  $100.  But  our 
great  trusts  are  often  capitalized  at  sums  that  cannot  be 
their  fair  value,  now  or  in  their  future,  in  the  belief  of  any 
person  of  sound  judgment.  Against  the  o])inion  of  Bourko 
Cochran,  who  speaks  more  or  less  from  the  tlieoretical 
standpoint,  should  be  set  up  that  of  James  B.  Dill,  Esq., 
the  well-known  corporation  lawyer  of  New  York,  who  re- 
cently bad  charge  of  the  incorporation  of  the  Carnegie 
Company,  capitalized  at  $200,000,000.  In  his  paper  read 
at  the  twelfth  annual  meeting  of  the  American  Economic 
Association,  held  at  Ithaca,  X.  Y..  December  27-29,  1899, 
entitled,  ''  So7ne  TeiuJencics  r>f  Trusts  u-hich  May  Beroiv.c 


Over-Capitalization  and  Publicity        217 

Dangers"';    there  occur  these  pregnant  paragraphs  (italics 
are  ours): 

"Excessive  Capitalization. — The  first  tendency  which  may  be 
regarded   as   dangerous  is  excessive  capitalization. 

"The  results  of  excessive  capitalization  are  threefold:  I.  The 
Impairment  of  Public  Confidence. — In  order  to  protect  the  finan- 
cial reputation  and  standing  of  the  country,  everything  relating 
to  finances  and  financial  institutions  should  be  above  suspicion 
either  of  mistake  in  judgment  or  conscious  error. 

"  The  country  with  securities  that  wildly  fluctuate,  that  are 
affected  by  every  breath  of  suspicion  or  suggestion,  is  somewhat 
in  the  same  shape  as  a  ship  at  sea  with  a  loose  and  rolling  cargo 
throwing  itself  from  side  to  side  in  the  hold  of  the  vessel.  To  the 
man  who  thinks,  from  a  financial  standpoint,  the  situation  pre- 
sents a  grave  question.  The  root  of  the  trouble  is  the  alarm, 
panic  and  fear  ichich  is  produced  from  a  lack  of  knowledge  and 
from  want  of  positive  information  as  to  hoxc  high  or  how  low 
these  securities  ought  to  go,  based  upon  a  public  demonstration 
of  the  corporate  fraction.  It  is  the  tcant  of  publicity,  the  resulting 
inability  to  form  an  opinion,  and  want  of  judgment  a^  to  sound 
values,  that  causes  the  panic  and  creates  the  ruin. 

"  II.  Improper  Dividend  Payments.— l  corporation  that  is  ex- 
cessively capitalized,  in  order  to  keep  in  the  race,  must  provide 
for  the  payment  of  at  least  minimum  dividends,  and  that  too 
upon  a  stock  which  by  no  means  represents  the  actual  value  of  the 
property,  and  often  the  estimated  earning  power  of  the  company 
is  based  upon  the  earning  power  in  prosperous  times  and  with  no 
allowances  for  times  of  lesser  prosperity.  In  such  a  situation, 
therefore,  a  board  of  honest  and  well-meaning  directors  are  faced 
with  a  difficulty;  they  miLst  either  pay  their  dividends  to  ap- 
proximately the  same  amount  as  their  neighbors  more  fortunately 
situated,  or  they  must  permit  their  stock  to  become  depreciated 
in  the  market  as  a  result  of  failure  to  pay  dividends.  The  ten- 
dency of  an  attempt  to  pay  dividends  ujion  this  excessive  capitali- 
zation is  to  pay  dividends  in  excess  of  tlie  actual  earning  power, 
and  out  of  capital  account. 

"One  way  in  whicli  this  is  said  to  have  been  done  is  by  the  con- 
version of  the  capita!  into  dividends,  a  process  which  in  the  end 
is  sure  to  wreck  the  company,  decreasing  as  it  does  its  earnintr 
power  eacli  year  in  proj)ortion  to  the  amount  thus  withdrawn.    The 


2i8  The  Trusts 

tendency  is  to  supply  the  gap  thus  made  in  the  capital  of  the  com- 
pany by  forcing  on  the  books  the  capital  account  with  property 
taken  from  elsewhere.  In  such  a  case  the  tendency  again  is  to 
conceal  from  the  stockholders  the  real  state  of  affairs. 

"III.  Effect  on  Prices  and  Wages The  third  effect  of  excessive 

capitalization  and  the  attempt  to  pay  dividends  upon  such  capital- 
ization is  a  tendency  to  create  artificial  earnings  vpon  an  artificial 
capital,  both  by  artificially  raising  the  price  of  the  article  produced, 
and  by  the  depreciation  of  the  iragcs  paid.  The  result  to  the  pub- 
lic, from  an  economic  standpoint,  is  objectionable." 

Corporate  management  in  the  United  States  has  been 
so  frequently  and  so  notoriously  corrupt  and  dishonest  and 
traitorous  and  villainous,  and  yet  so  infrequently  punished 
and  so  rarely  even  rebuked  or  condemned,  that  there  are 
not  a  few  persons  who,  knowing  the  hazards  of  the  owner- 
ship of  corporate  stocks  feel  but  little  sympathy  with  those 
who  arc  deceived  or  defrauded  in  transactions  relating  to 
such  property.  To  a  great  degree,  ownership  of  corporate 
stocks,  whether  it  be  ownership  of  the  scrip  for  investment 
purposes,  or  purchases  upon  margin,  is  considered  by 
many  as  little  better  than  "  stock  gambling."  The  practi- 
cally utter  want  of  any  voice  in  the  direction  of  the  busi- 
ness by  the  small  stockholder,  his  generally  complete  lack 
of  any  definite  knowledge  of  the  manner  in  which  his  busi- 
ness interests  in  great  corporations  arc  being  managed, 
make  the  actual  value  of  one's  property  in  such  companies, 
a  mere  matter  of  guess.  The  small  investor  who  buys  such 
property,  to  a  great  extent  "  buys  a  pig  in  a  bag."  Wlien 
he  sells  one  stock  to  l)uy  another,  he  is  doing  little  else 
than  repeating  the  school  boy's  favorite  method  of  specu- 
lative exchange,  "trading  jack-knives  witliout  sight  and 
witliout  seeing."'  Xot  only  has  the  small  stockholder  no 
accurate  knowledge,  but  time  and  time  again  the  olficers 
in  char^'o  of  his  property  have;  misled  him,  eitlier  with 
absclutelv  false  statements  or  with  statements  that  natu- 


Over-Capitalization  and  Publicity        219 

rally  cause  him  to  draw  conclusions  and  inferences  that 
were  incorrect.  Hundreds  of  times,  lie  has  seen  the  man- 
agers of  his  property  absolutely  mismana<re  it  and  do  every- 
thing ill  their  power  to  ruin  his  business  and  (h.>preciate  its 
value.  ])uring  the  spring  of  1900  the  press  of  the  country 
has  been  fdlcd  with  charges  that  an  officer  of  the  American 
Steel  and  Wire  Company  has  purposely  misled  the  public 
concerning  the  condition  of  that  great  trust;  that  the 
business  of  the  company  has  been  managed  in  such  a  way 
as  to  depress  the  market  price  of  the  stocks  of  the  com- 
pany, and  that  men  have  been  needlessly  thrown  out  of 
work  and  factories  unnecessarily  closed,  for  the  purpose  of 
giving  the  public  the  impression  that  the  affairs  of  the 
company  were  not  in  a  prosperous  condition.  Even  if  in 
this  particular  case  these  charges  of  misrepresentation  and 
mismanagement  arc  untrue,  as  perhaps  is  the  fact,  yet  it  is 
only  an  instance  of  the  possibility  of  mismanagement  by 
corporation  officers  and  of  the  impairment  of  puhlic  con- 
fidence in  the  present  methods  of  cor]iorate  control  and 
management.  The  Third  Avenue  Kailroad,  one  of  the 
great  systems  of  surface  street  cars  in  the  metropolis,  has 
lately  been  forced  into  bankruptcy  apparently  through  the 
mismanagement  and  dishonesty  and  criminal  conduct  of  its 
ofTicers.  The  annals  of  American  finance  are  fdlcd  with 
similar  instances. 

A  remedy  that  would  he  most  pofent.  for  nil  the  evils  of 
corporation  mismanagement,  would  he  to  refuse  to  limit 
the  liabiliiv  of  ofTicers  and  diri'C'fors.  Tt  is  necessnrv  in 
the  case?  of  great  corporations  to  limit  the  general  liability 
of  stockhcdders  \n  the  ])ar  value  of  the  stock  owned  bv 
them.  Tliis  is  Ix'cause  of  the  absolute  impossibility  of  all 
the  stockholders  taking  an  active  ])art  in  the  mann<jcment. 
lUit  this  reason  does  not  a]iply  to  ofTicers  and  director?. 
Corporate  misnumagemeut  will  never  he  stopped,  the  rights 


220  The  Trusts 

of  minority  stockholders  will  never  be  fully  protected^  un- 
til officers  and  directors  are  held  practically  to  the  same 
liability  as  individuals,  and  are  released  from  it  only  when 
the  company's  records  show  that  the  special  action  creating 
the  liability  was  opposed  by  them.  A  director  Avho  votes 
to  declare  a  dividend  which  has  not  been  earned,  should  be 
criminally  punished  for  it,  and  the  corporation  should 
have  the  right  to  recover  it  from  him  at  the  suit  of  any 
stockholder.  At  any  rate,  the  minimum  of  liability  of  di- 
rectors of  corporations  should  not  be  less  than  that  of 
directors  of  national  banks  or  trustees  of  saving  banks. 

Dishonest  and  corrupt  management  is  not  nccossarilv 
confined  to  corporations  that  are  over-capitalized,  but  the 
creation  of  a  large  amount  of  inflated  stock  not  only  in- 
creases the  tendency  to  improper  management,  to  undue 
speculation,  and  to  shameful  manipulation,  but  multiplies 
the  opportunities  for  such  malpractices. 

Lack  of  publicity  is,  however,  the  real  evil,  for  it  fur- 
nishes to  the  persons  having  knowledge  of  the  true  con- 
dition of  the  affairs  of  a  company,  opportunities  to  profit 
by  their  own  peculiar  knowledge,  and  by  the  ignorance  of 
others  who  have  money  to  invest  or  who  hold  the  stock 
of  the  company  and  wish  to  sell  it. 

We  have  an  old  law  maxim:  "The  safety  of  the  public 
is  the  supreme  law,"  but  the  safety  of  the  public  can  be 
pocnred  only  when  there  is  knowledge  of  the  real  dangers 
confronting  it.  In  our  system  of  corjooration  laws,  the 
irmorance  of  the  public  is  the  supreme  flaw.  The  Xriu 
Ynrlc  TTprald  of  ^larch  Hth,  in  speaking  of  the  reduction  in 
the  dividend  of  the  Sugar  Trust,  says: 

"  The  Sujrar  Trust  oxhibits  in  an  rqiially  clrar  lisrht  the  pvila 
of  soprocy  in  ilio  Tnanafremeiit  of  fhc^e  preat  combinations.  A  fall 
of  .«;r;0  a  '^yinrf.  in  flio  last  fhrop  iiionihs,  procrdcd  yostrnlay's  re- 
duction of  the  dividends.    .-Is  no  fstatcmcnt  of  the  earnings  or  finan- 


Over-Capitalization  and  Publicity        221 

cial  condition  of  the  pj-opcrty  t.s  made  to  the  aliare-hoidrrf^,  they 
could  have  no  mea7is  of  (jauging  the  real  value  of  their  holdings. 
TS'o  knowledge  that  the  dividend  would  be  cut  in  half;  no  protection 
agoi)i.st  uuntiijulation  of  tlie  market  by  iufiiderii  or  against  the 
ruinor-niongers  arid  speculators  of  Wall  l^treet.  A  little  group  of 
insiders — or  jtossibly  one  individual  among  them — alone  knew 
vhat  was  to  be  done  ichen  the  directors  icvre  yesterday  hurriedly 
summoned,  two  days  in  advance  of  the  expected  meeting  time,  and 
after  a  three  minutes'  session  announced  the  fact  of  such  vital  im- 
portance to  thi'  thousands  of  share-holders  in  the  property.  On 
behalf  of  consumers,  the  trusts  must  be  kept  from  tampering  with 
tarilTs  and  legishitures.  On  behalf  of  the  investing  public,  they 
must  be  compelled  to  make  full  and  sworn  statements,  and  direct- 
ors must  not  be  permitted  to  serve  as  mere  decoys,  but  must  be 
held  to  strict  accountability,  and  punished  when,  as  in  the  case  of 
tlie  Malting  Company,  described  in  The  Sunday  Herald,  tlie  siiare- 
holders  are  deceived  by  the  payment  of  so-called  dividends  in  ex- 
cess of  earnings." 

I'nfortuiiatcly  there  lias  been  of  late  in  all  states,  a  ,c:row- 
ing  tendency  to  relieve  corporations  from  the  duty  of  pub- 
licity of  their  affairs.  James  B.  Dill,  Esq.,  who  has  al- 
ready been  cpioted,  in  his  paper  read  at  the  meeting  of 
tlie  Amei'iean  Economic  Association,  commented  on  the 
marked  tendency  to  avoid  proper  publicity,  as  numifestod 
by  rccrtiily  enacted  legislation  in  several  important  states. 
In  certain  great  financial  states  practically  no  publicity  is 
]i(»w  reipiircd.  But  it  lia.s  remained  for  Delaware,  the  next 
to  the  smallest  of  all  the  states,  to  enact  a  corporation  law 
■which  is  practically  a  license  for  freebooting  ami  piratical 
financial  buccaneers  to  clothe  themselves  in  the  garb  of  a 
cnrjtoration,  and,  taking  advantage  of  the  comity  that  has 
nhvavs  allowed  a  corjxjration  formed  in  one  state  to  do 
busine.-s  in  every  other,  to  ])rey  u])oii  the  unsuspecting 
and  the  innocent.  There  has  recently  been  circulated 
throughout  the  country  a  little  four-paged  card  entitled 
"'  Wiiij   do   ihcij   Inrnrpiirnlr   in    Deldwarc?"     Sixteen   rei- 


222  The  Trusts 

sons  are  given;  and  the  laxity  of  the  law  as  epitomized 
in  those  reasons  and  the  opportunity  for  fraud  and  unfair 
dealings  that  this  statute  renders  possible,  are  a  reflection 
upon  the  integrity  and  honor  of  the  state  of  Delaware. 
AVe  quote  from  that  circular  the  sixteen  reasons,  italicizing 
certain  ones  of  them  which  particularly  render  publiciiy 
impossible,  or  which  open  the  door  to  fraud.  Thus  it  is 
stated  that  a  corporation  organized  under  the  Delaware 
law: 

'■'  1.  May  hold  its  annual  meetings  outside  of  this  State. 

2.  May  keep  all  original  hools  outside  of  this  State. 

3.  May  issue  full-paid  stock  for  cash,  property  or 
SERVICES. 

4.  May  save  from  ^  to  ^  of  the  expense  required  under 
ihe  Xew  Jersey  Law. 

5.  May  carry  on  any  lawful  business  except  banking. 

6.  May  have  a  perpetual  or  limited  existence. 

7.  May  carry  on  its  business  in  any  part  of  the  world. 

8.  May  have  a  capital  stock  of  any  amount,  being  not 
less  than  $2000. 

9.  May  begin  business  when  $1000  of  capital  stock  is 
fiihscrihed,  and  this  subscription  need  not  he  paid  until  the 
Jjoard  of  Directors  so  direct. 

10.  May  hold  and  own  stock,  bonds,  etc.,  of  other  cor- 
])orations,  as  trustee  or  otherwise,  and  vote  on  the  stock  so 
]iel(l  by  it. 

1 1.  May  liave  two  or  more  kinds  of  stock  with  such  con- 
nil  ions  as  may  ])e  desired. 

12.  ^lay  easily  be  dissolved. 

13.  ^fay  innr'jc  or  cnsoUdale  n'itli  any  other  corporation. 
11.  Mill/  rasilij  inrrriisr  ir  decrease  its  capital  stock. 

IT).  May  hiild  as.^p/s  ami  create  liiihilities  to  an  unlimited 
extent,  unless  limited  in  the  Charter  or  By-Laws. 


Over-Capitalization  and  Publicity        223 

16.  May  organize  with  three  or  more  persons  as  incor- 
porators iclio  may  reside  in  any  part  of  the  world." 

The  necessity  for  publicity,  as  well  as  the  facts  con- 
cerning which  the  public  have  a  right  to  demand  knowl- 
edge, have  been  well  set  forth  by  Governor  lioosevelt  in 
his  annual  message  to  the  New  York  Legislature  in  Janu- 
ary, 1900.  After  declaring  that  there  was  absolute  neces- 
sity for  courageous  and  effective  remedial  legislation  upon 
the  subject  of  trusts,  he  wrote  as  follows: 

"  The  first  essential  is  knowledge  of  the  facts,  publicity.  Much 
can  be  done  at  once  by  amendment  of  the  corporation  laws  so  as 
to  provide  for  such  publicity  as  will  not  work  injustice  as  betweea 
business  rivals. 

"  The  chief  abuses  alleged  to  arise  from  trusts  are  probably  the 
following:  Misrepresentation  or  concealment  regarding  material 
facts  connected  witli  the  organization  of  an  enterprise;  the  evils 
connected  with  unscrupulous  promotion;  over-capitalization;  un- 
fair competition,  resulting  in  the  crusliing  out  of  competitors  who 
themselves  do  not  act  improperly;  raising  prices  above  fair  com- 
petitive rates;  tlie  \\  ielding  of  increased  power  over  the  wage- 
earners.  Of  course  none  of  these  abuses  may  exist  in  a  particular 
trust,  but  in  many  trusts,  as  well  as  in  many  corporations  not  or- 
dinarily called  trusts,  one  or  more  of  them  are  evident.  Some  of 
these  evils  could  be  })artially  remedied  by  a  modification  of  our 
corporation  laws.  Here  we  can  safely  go  along  the  lines  of  the 
more  conservative  Xew  England  states  and  probably  not  a  little 
further.  Such  laws  will  themselves  provide  the  needed  publicity 
and  the  needed  circumstantiality  of  stut-ement. 

"  We  sliould  know  autlioritatively  wliether  stock  represents 
actual  value  of  ])lants  or  whetlier  it  represents  brands  or  good  will, 
or,  if  not.  what  it.  tloes  rejii'esent,  if  anything.  It  is  desirable  to 
know  \ww  tiiucii  was  actually  bouglit,  how  much  was  issued  free 
and  to  wlioin,  wml.  if  ]i()ssililc.  for  what  reason.  In  the  first  place, 
this  would  he  invaluahic  in  preventing  harm  being  done  as  among 
the  stockholders,  for  many  of  the  grossest  wrongs  that  are  per- 
petrated are  those  (if  jironioters  and  organizirs  at  the  expen.«e  of  the 
general  ]>ublic  who  arc  invited  to  take  shares  in  business  organiza- 
tions. In  the  next  place,  tliis  would  enable  us  to  see  just  what  the 
public  have  a  right  to  expect  in  the  way  of  service  and  taxation.'' 


224  The  Trusts 

It  is  a  rare  tribute  to  the  practicability  of  Governor 
Eoosevelt's  suggestions  which  he  endeavored  to  have  em- 
bodied in  suitable  legislation,  that  the  present  Democratic 
Comptroller  of  the  city  of  New  York,  Mr.  Bird  S.  Coler, 
at  present  the  most  conspicuous  candidate  for  the  Demo- 
cratic nomination  for  Governor  during  the  coming  cam- 
paign, has  now  thrown  the  weight  of  his  influence  toward 
a  solution  of  the  trust  problem,  substantially  the  same  as 
that  recommended  by  the  Governor  in  his  message.  It  is 
most  fortunate  that  that  element  in  both  parties  which 
stands  for  conservatism  in  business  matters,  but  for  vigor- 
ous purity  in  politics,  is  in  such  substantial  accord.  All 
men  will  agree  with  Mr.  Coler  in  his  statement  that  the 
state  being  the  power  which  authorizes  the  corporation 
to  do  business  under  a  special  charter  or  grant  of  privilege, 
should  stand  ready  to  protect  the  individual  in  his  rights, 
and  that  a  knowledge  of  the  corporation's  business  by  the 
public  is  necessary  for  the  proper  protection  of  the  public. 
Just  as  the  state,  that  is.  New  York  State,  has  long 
exercised  the  right  to  inspect  the  business  and  standing 
of  life  and  fire  insurance  companies,  just  as  the  National 
Government  inspects  and  examines  banks,  so  now  should  the 
state  demand  of  all  corporations  created  by  it  or  permitted 
by  it  to  do  business  within  its  limits,  such  publicity  as 
shall  enable  the  people  to  ascertain  whether  or  not  the 
corporate  powers  and  privileges  are  being  used  to  oppress 
the  people.  This  government  inspection  of  corporations 
is  the  plan  of  dealing  with  trusts  that  Mr.  Coler  advocates, 
and  is  the  plan  which  he  has  urged  the  Democrats  of  every 
Ftate  to  favor  in  the  platforms  to  be  adopted  by  them  at 
their  conventions  during  the  ensuing  year.  The  State  of 
New  York  may  deem  itself  peculiarly  fortunate  that  '^^^. 
Coler  should  so  far  endorse  tlie  views  which  in  his  annual 
message  Governor  Eoosevclt  had   expressed,  and  that  a 


Over-Capitalization  and  Publicity        225 

possible,  if  not  probable,  Democratic  candidate  for  the 
governorship,  should  urge  the  same  kind  of  statutory  en- 
actments, for  it  gives  promise  of  united  action  and  of  a 
continuous  plan  of  campaign,  regardless  of  any  political 
somersaults  that  may  occasion  a  change  of  party  admin- 
istration. ]\It.  Colers  public  statement  concerning  trusts 
was  made  on  or  about  May  1,  1900.  How  much  in  har- 
mony with  him  Governor  Eoosevelt  is,  can  l^e  seen  by  the 
following  utterance  of  the  Governor  made  in  January  of 
that  year: 

"  Where  a  trust  becomes  a  monopoly  the  state  has  an  immediate 
right  to  interfere.  Care  should  be  taken  not  to  stifle  enterprise  or 
disclose  any  facts  of  a  busine^  that  are  essentially  private;  but 
the  state  for  the  protection  of  the  public  should  exercise  the  right 
to  inspect,  to  examine  thoroughly  all  the  workings  of  a  great  cor- 
poration just  as  is  now  done  with  banks,  and  whenever  the  inter- 
ests of  the  public  demand  it,  it  should  publish  the  results  of  its 
examination.  Then,  if  there  are  inordinate  profits,  competition  or 
public  sentiment  will  give  the  public  the  benefit  of  lowered  prices, 
and  if  not,  the  power  of  taxation  remains.  It  is,  therefore,  evident 
that  publicity  is  the  one  sure  and  adequate  remedy  which  we  can 
now  invoke.  There  may  be  other  remedies,  but  what  these  others 
are  can  only  be  found  out  by  publicity,  as  the  result  of  investiga- 
tion.   The  first  requisite  is  knowledge,  full  and  complete." 

It  is  to  be  hoped  that  Comptroller  Coler  will  succeed  in 
persuading  the  Democrats  of  Xew  York,  as  well  as  of  all 
the  otber  states  in  the  union,  to  adopt  his  anti-trust  plank 
and  endorse  tlie  legislation  suggested  by  Governor  Roose- 
velt and  himself,  for  if  all  parties  can  unite  in  advocating 
such  legislation,  it  is  unquestionable  that  a  great  deal  can 
be  done  to  abolish  the  evils  attendant  upon  trusts. 

What  degree  of  publicity  shall  be  required  beyond  state 
inspection  is  a  question  as  to  which  there  will  be  a  variance 
of  opinion.  Everyone  is  willing  to  concede  that  there  are 
many  private  matters  as  to  which  trusts  and  corporations 


226  The  Trusts 

should  not  be  asked  because  important  business  secrets 
would  be  divulged.  The  publicity  that  is  required  of  one 
corporation  must  be  required  from  all  corporations  simi- 
larly situated.  It  is  contended  by  m.^ny  that  that  pub- 
licity as  to  any  matter  concerning  a  corporation  which  is 
acceptable  to  every  stockholder  is  sufficient  publicity  to 
answer  all  the  requirements  of  the  community.  We  are 
inclined  to  believe  that  this  proposition  is  true,  although 
perhaps  the  bondholders  should  be  entitled  to  the  same 
information.  It  tends  to  make  absolutely  public  all  mat- 
ters relating  to  the  very  large  corporations,  while  it  leaves 
the  affairs  of  the  small  corporations  known  only  to  the  few 
connected  with  them.  If  a  corporation  has  but  five  stock- 
holders, ordinarily  it  will  be  a  corporation  of  small  capital- 
ization and,  at  any  rate,  one  which  afreets  the  people  in  very 
few  respects.  A  corporation  with  that  number  of  stock- 
holders will  not  be  one  whose  securities  are  dealt  in  upon 
the  stock  exchange.  It  will  not  appeal  to  the  investing 
public  for  financial  assistance.  It  will  not  try  to  float 
bonds  or  to  list  its  stock.  Ordinarily,  it  will  have  no 
dominant  control  over  any  industry.  Ordinarily,  it  will 
have  a  great  number  of  competitors,  and  will  be  in  no 
sense  a  monopoly.  On  the  otlier  hand,  if  a  corporation 
has  a  thousand  or  more  stockholders,  as  do  all  our  greaf" 
industrial  trusts,  and  if  every  one  of  these  thousand  stock- 
holders have  full  and  accurate  information  as  to  the  af- 
fairs of  the  company,  the  public  will  have  the  same  knoT\-l- 
edge,  because  of  the  absolute  im])0ssibility  of  a  thousand 
men  kee])ing  those  inattcrs  secret.  It  has  been  well  said: 
'^  rublicity  to  all  of  the  stockholders  is  ])ractical]y  publicity 
to  llic  wr)rl(],  and  the  public  need  not  be  alarmed  about  a 
lack  of  jiuhlicity  in  any  corporation  where  every  essential 
fact  concerning  its  inception,  organization,  nianagenient, 
and  all'airs  is  known  to  axicrx  r^tockholder."     What  objec- 


Over-Capitalization  and  Publicity        227 

tion  can  there  be  to  a  statute  giving  to  every  stockholder 
the  right  to  expect  information  concerning  the  property 
of  which  he  is  one  of  the  owners?  It  is  often  said  that 
the  corporation  is  merely  a  form  of  })rivate  business  organ- 
ization, and  that  the  public  has  no  right  to  know  these 
private  business  matters;  but  it  should  be  borne  in  mind 
that  the  })ublicity  here  contended  for  is  publicity  only  to 
stockholders  themselves.  "  But,"  say  the  objectors,  "  pub- 
licity to  all  stockholders  of  a  great  corporation  is  publicity 
to  the  whole  world  and,  in  fact,  it  is  your  desire  to  get 
information  for  the  whole  world  that  leads  you  to  seek  to 
compel  the  atfairs  of  the  corporation  to  be  made  known  to 
all  of  its  stockholders."  '*  The  plan  proposed  by  you," 
they  say,  ''  will  permit  any  intrusive  and  inquisitive  person, 
by  buying  a  few  shares  of  stock,  to  expose  the  affairs  of 
the  cor])oration  against  the  wishes  of  the  great  majority 
of  its  stockholders."  The  re])ly  that  immediately  occurs  is 
that  if  great  corporations  are  unwilling  that  every  stock- 
liolder  should  have  full  informati(m  concerning  the  affairs 
of  the  company  in  which  tlicy  ]],>]{]  stock,  then  they  should 
not  ask  the  pul)lic  to  take  stock  in  it.  If  a  man  with  $100 
interest  in  a  trust  is  not  entiiled  to  knowledge  as  to  the 
way  in  which  this  $100  worth  of  his  property  is  lieing  man- 
aged, corporations  sliould  not  seek  to  induce  people  to  in- 
vest $11)0.  If  iucli  a  sum  is  too  small  an  interest,  then  let 
th(^  ]'iar  value  of  the  shares  1)0  greater,  say  $1,000  instead 
of  $10(i,  or,  what  is  tlie  same  thing,  sell  to  no  person  less 
tlian  t('n--iiart>  lots.  Perhajis  a  requirement  that  a  person 
owning  .**;10.000  woriii  of  stock,  or  that  a  group  of  persons 
owning  in  the  agirre^'ate  $2o,'i00  worth  of  stock,  should  be 
granted  explicit  information  ujion  reasonable  demand, 
would  answer  all  practical  purposes  in  the  case  of  our 
very  great  coi-poration?  quite  as  well  n=  a  requirement  that 
every  single  stockholder  should  have  this  privilege. 


2  28  The  Trusts 

Whatever  the  nature  and  the  degree  of  the  puljlicity 
that  is  required,  it  must,  in  order  to  cope  Avith  the  evils  ot 
trusts,  embrace  a  system  of  state  inspection  after  the  man- 
ner of  our  bank  examinations,  as  recommended  by  Gov- 
ernor Eoosevelt  and  Comptroller  Coler.  Furthermore,  the 
state  and  the  nation  must  supplement  this  publicity  by 
detailed  statistics  which  will  state  for  each  great  trust  the 
cost  of  production;  2)rices,  both  wholesale  and  retail,  for 
the  articles  made  by  these  trusts;  rates  of  wages;  output 
and  capacity;  comparative  quality;  number  of  hands  em- 
ployed; extent  of  competition,  both  foreign  and  domestic, 
together  with  such  other  information  as  may  have  a  bear- 
ing upon  the  question. 

It  may  be  said  that  past  experience  with  trusts  docs  not 
augur  well  for  the  success  of  any  movement  to  make  them 
reveal  the  desired  information.  But  there  has  been  found 
little  difTiculty  in  enforcing  the  laws  for  the  inspection  of 
banks  and  insurance  companies,  and  the  inoney  power  (U 
these  great  financial  institutions  is  hardly  less  than  that 
of  the  trust,  and  their  business  secrets  are  matters  that 
should  be  quite  as  jealously  guarded. 

It  is  unquestionably  true  that  pulilicity  will  largely  rem- 
f'dy  the  evil  of  over-capitalization,  but  possddy  it  will  not 
yircjve  to  })e  a  complete  cure.  If  insufTlcicnt, direct  legislaiiftn 
against  the  evil  should  be  tried.  There  can  be  no  question 
that  over-capitalization  gives  ri~e  to  many  (:vi]s;  and 
that  in  no  way  is  it  of  any  material  benefit,  either  economi- 
cally or  financially.  If  a  corporation  were  formed  u]!on  a 
liasis  of  a  stock  issue,  representing  only  the  actual  value  of 
its  property,  certainly  no  harm  could  be  done.  Sucli  a 
basis,  as  has  been  well  said  by  llie  Journal  of  Commrrcr, 

"  would  sprve  ;ill  the  purpose?  of  llie  in.nnufnflurcrs  vho  romhiTie 
to  avprt  compel  it  ion  imd  1o  sorMiro  Ihc  ofouomics  of  sinplfi  manage- 
ment, rather  tlian  to  Fell  to  the  jiuhlic  titles  to  surplus  profits  that 


Over-Capitalization  and  Publicity        229 

■\vill  1)0  earned  in  (lie  future  if  trade  eontinues  to  prosper  and  com- 
petition can  t)e  restrained.''  "  It  is  iinpossihle."  tliis  paper  says,  "to 
resist,  the  (■()n\i(ti<in  tiiat  most  of  the  tru>ts  arc  very  much  ovcr- 
eapitalizt'd.  and  if  this  lie  the  ease,  the  value  of  the  common  stock 
is  based  upon  conditions  that  may  ehanj^e  rapidly,  and  that  can 
hardly  he  expected  to  prove  [lermanent.  A  curtailment  of  earnings 
would  lower  the  value  of  stocks  which  are  extensively  used  as  col- 
lateral for  loans,  and  this  is  one  of  the  dangers  of  trust  finance  as 
it  is  practiced." 

'J'lie  interests  of  the  pii])lic  are  too  much  at  stake  to  per- 
mit corporations  to  nia.^([iiera(le  around  under  a  capital- 
ization of  tens  of  millions,  wlien  their  actual  assets  are 
but  small  fractions  of  these  sums.  The  people  at  large 
cannot  afford  to  accept  the  statements  of  interested  specu- 
lators as  to  the  value  of  their  properties,  which  they  ask 
the  peo])]e  to  take  stock  in.  The  state  in  its  sovereign 
capacity  cannot  alTord  to  give  a  charter  or  a  certificate  of 
incorporation  to  a-  conntany  ca[)italized  at  $10,000,000 — 
which  ca]Mia]izatioii.  in  itself,  in  the  minds  of  many,  is  a 
certificate  of  valuation  hy  the  state — unless  the  state  has 
taken  every  means  to  prcvem  the  issue  of  stock  except  for 
actual  cash  or  in  exchange  for  property  which  is  taken  at 
its  fair  value  as  dclerinined  hy  coni])etent  and  disinterested 
pariit'S,  oi"  l)y  state  olllcials  acting  in  a  judicial  or  quasi- 
judicial  capacity.  Tliere  is  an  J-higlish  law  concerning  the 
is-ue  of  stock  in  jiayint'Ut  of  services  and  property  which 
AnuM'ican  stales  might  co])y  to  their  advantage.  That 
l;iw  i)rovi(les  that  all  stock  which  is  issued  shall  he  held  stth- 
ject  to  [laymciit,  in  full,  in  c;;s}i  in  tlic  hands  of  whomso- 
ever it  may  he.  unless  before  the  issiu'  and  allotment  there- 
of, a  conti'act  shall  be  filed  in  the  registered  office  of  the 
coni])any.  which  I'oniract  shall  djscdose  in  detail  the  con- 
sideration in  tile  way  of  Sv-rvices  or  property  for  whiidi  the 
stock  shall  he  ir--ucd  in  licu  of  crish.  and  that,  iit  the  eveitt 
of  sucdi  iilinu'  of  sindi  conifact.  that  >{nv]i  can  be  issued  for 


230  The  Trusts 

property  or  services  rendered  to  the  amount  of  the  par 
value  of  this  stock. 

"When  all  that  can  be  done  by  direct  legislation  to  pre- 
vent over-capitalization  is  done,  we  will  still  feel  the  need 
of  publicity,  because  dishonest  officers  of  great  corpora- 
tions, even  though  every  share  of  their  stock  shall  have 
been  issued  for  actual  cash,  have  infinite  ways  of  plundering 
the  public  if  allowed  to  act  secretly  and  under  cover. 

One  of  the  serious  evils  associated  with  corporate  man- 
agement to-day  is  the  speculation  by  officials  and  directors 
of  companies  in  the  stock  of  their  own  corporations.  It  is 
unnecessary  to  enlarge  upon  the  evil?  of  such  a  practice. 
It  would  be  pernicious,  even  if  this  speculation  were  con- 
fined to  the  .})urchase  of  the  stocks  of  the  company  with  a 
view  to  their  subseqtient  increase  in  value,  for  constant 
speculation  even  of  this  character  would  mean  an  interfer- 
ence with  the  discharge  of  the  proper  duties  of  the  officers, 
and  there  would  always  be  a  temptation  for  the  speculating 
official  to  conceal  from  other  stockholders  information  con- 
cerning the  true  value  of  their  property.  The  temptation 
would  be  so  strong  that  unquestionably  there  would  be  not 
only  lack  of  information,  but  misinformation  and  the  cir- 
culation of  all  sorts  of  reports  for  the  purpose  of  depress- 
ing the  market  price  of  the  stocks.  But  speculation  on 
this  side  of  the  market  would  have  at  least  one  redeeming 
feature,  and  that  is  that  the  oflicials  would  actually  be 
trying  to  improve  the  value  of  the  property  entrusted  to 
them.  Stock  speculation,  however,  qtiite  as  frequently 
takes  the  form  of  "  short  sales,"  that  is,  agreements  to  sell, 
at  a  certain  price,  that  winch  one  does  not  possess  with  the 
('X])ectation  of  purchasing  it  later  at  a  lower  price,  and 
thcrcljy  fulfilling  the  selling  contract.  The  temptation  in 
s])eoulati(in  of  this  character  is  to  do  everything  that  is 
]>ossiljle  to '|(]e|)ress  the  value  of  the  property  which  has 


Over-Capitalization  and  Publicity        231 

been  sold  and  whicli  one  must  l)uy  to  make  good  the  de- 
livery. It  may  be  impracticable  to  frame  any  statute  that 
will  actually  stop  this  practice,  but  it  is  an  evil,  the  in- 
jurious elTect  of  which  cannot  be  overestimated,  and  one 
Avhich  should  be  prevented  at  any  cost.  Here,  again,  pub- 
licity appears  to  be  the  most  cflectivc  remedy,  because 
when  all  stockholders  have  that  same  degree  of  knowledge 
concerning  the  affairs  of  the  company  which  the  speculat- 
ing officer  has,  then  will  his  ability  to  influence  the  market 
and  to  deceive  intending  purchasers  or  sellers  be  ended. 

It  is  to  be  borne  in  mind  that  the  publicity  that  is  re- 
quired is  not  only  honest  information  by  the  officers  of  cor- 
porations which  are  already  founded,  but  complete  specific 
and  detailed  statements  by  j)romoters  and  all  others  who 
engage  in  organizing  and  establishing  trusts. 

Publicity  may  not  be  a  complete  cure,  but  it  will  be  a 
remedy  not  only  for  the  evils  of  over-capitalization,  but  for 
all  the  evils  and  dangers  of  trusts.  If  publicity  is  ob- 
tained, prices  cannot  long  be  kept  unduly  high,  dividends 
cannot  be  swelled  by  extortion,  stocks  cannot  be  made  to 
appear  as  having  an  earning  power  greater  or  less  than 
what  they  actually  have,  for  competition  will  be  sure  to 
sot  in.  If  there  is  publicity,  the  stockholders,  little  as 
well  as  big,  will  have  exact  knowledge  of  the  conditions 
of  their  property;  and  mismanagement  by  officers  and 
directors,  and  the  betrayal  of  the  trusts  reposed  in  them, 
will  be  rare,  rublicity  is  the  best  remedy  to  try,  for  it 
will  tend  to  sto]i  the  evils  of  corporate  mismanagement, 
whether  onnectcd  with  comjianies  that  are  fairly  capital- 
ized or  tliD.^o  thai  are  over-cat>italiz('d.  With  ]icrfoct  pub- 
licity, there  would  possibly  l)e  little  evil  in  over-capital- 
iz;iii(ui  itself.  If  we  know  tiu^  real  and  true  earning  power 
of  the  stork,  its  real  dividtMid-jiaying  ability,  a  market 
]H-;eo  will  be  fixed  fnr  it  ba~ed  ilicreupon;  but  without  such 


232  The  Trusts 

knowledge  the  price  may  be  greatly  more  or  even  greatly 
less  than  it  is  worth.  The  insiders  are  the  ones  who  profit; 
the  public  the  ones  who  suffer. 

One  great  need  of  the  day,  then,  is  publicity  of  the 
affairs  of  corporations.  Another  is  more  strict  control 
over  corporation  methods.  We  should  enact  and  enforce 
statutes  that  will  prevent  the  evils  and  dangers  of  corpor- 
ate mismanagement  and  which  will  provide  the  most  strin- 
gent penalties  for  the  dishonest  practices  of  which  corpor- 
ation officers  are  so  frequently  guilty.  The  people  must 
rouse  themselves  from  the  lethargy  into  which  they  ha"ve 
sunk.  Instead  of  looking  indifferently  upon  the  losses  sus- 
tained by  a  person  through  the  rascality  of  the  officers 
of  corporations  in  which  he  is  interested,  and  instead  of 
regarding  him  merely  as  a  party  who  has  been  "  burned/' 
the  people  must  realize  that  all  classes,  from  the  rich  in- 
vestor to  the  laborer  with  a  few  dollars  in  the  savings  bank, 
are  vitally  interested  in  the  attainment  of  a  higher  stand- 
ard of  honesty  in  dealing  with  corporate  property.  The 
wrecking  of  public  corporations,  with  a  resultant  Inss  to 
thousands  of  innocent  and  deluded  stockholders,  should  be 
treated  as  a  crime  deserving  the  severest  punishment. 


CHAPTER  XII. 
WHOSE   FAULT    IS    IT? 

It  would  be  most  unfortunatte  if  a  problem  so  momen- 
tous and  so  complex  as  that  produced  by  trusts,  should 
become  a  question  of  partisan  politics.  It  is  so  great  that 
it  needs  all  the  wisdom,  all  tlie  patience,  all  the  calmness, 
all  the  conservatism,  and  all  the  courage  of  all  the  people. 
Yet,  just  as  trusts  have  of  late  been  so  inconsiderately  de- 
nounced, it  is  becoming  more  and  more  the  fashion  for 
eacli  party  to  lay  the  evil  of  trusts  at  the  door  of  the  other. 
The  Democrats  say  that  trusts  are  the  outgrowth  of  Ro- 
pul>lican  policy;  the  Republicans  charge  that  the  Demo- 
crats have  absolutely  refused  to  unite  with  them  in  elFec- 
tive  legislation  against  trusts,  or  in  an  attempt  to  get  the 
V.  S.  Constitution  amended  so  as  to  give  Congress  com- 
ji'ete  and  amph.'  power. 

'Jlie  l)t.'iiioci':it>  ai'e  very  fond  of  denouncing  the  Re- 
publicans as  the  friends  ol;  trusts.  The  latter  are  declared 
by  them  to  be  the  allies  of  great  wealth.  Their  policy  of 
aiding,  by  means  of  a  protective  tariff,  in  the  building  up 
of  Amerit^nii  manufacturing,  and  the  consequent  develop- 
nuMit  of  American  resources,  which  has  done  so  much  to 
nuike  tlii>  nation  wealthy  and  this  people  prosperous^  has 
been  denounced  as  "the  motlier  of  trusts.*' 

Th(,^  thief  who  is  being  pursued  througli  the  city  streets 
is  very  apt  to  ]>oini  to  some  one  ahead  of  him  and  begin 
a  pursuit  of  that  person,  with  loud  cries  of  "stop  thief." 

233 


234  The  Trusts 

The  Democratic  denunciation  of  the  Eepiiblican  party  as 
the  party  of  trusts,  is  the  greatest  of  all  "  stop  thief  "  cries. 
They  are  quite  as  guilty  as  Eepublicans  in  the  wickedness 
of  trusts.  The  truth  is  that  the  Democrats  as  a  party  and 
as  individuals  arc  no  more  and  no  less  censurable  on  the 
trust  question  than  the  Eepublicans.  Trust  owners,  or- 
ganizers, and  promoters  are  no  more  confined  to  the  Ee- 
publican  party  than  are  butchers,  or  steel  workers,  or 
bakers.  Unquestionably,  many  trust  organizers  arc  Ee- 
publicans, but  there  is  an  equal  number  of  Democrats  like- 
wise interested. 

Governor  Atkinson,  in  his  address  at  the  Chicago  Trust 
Conference,  very  frankly  said  that  trusts  are  not  confined 
to  any  one  political  party.  His  words  were:  "  I  find  about 
as  many  Democrats  in  trusts  in  the  United  States  as  Ee- 
publicans, and  I  find  at  least  two  of  the  mammoth  trusts 
of  this  country  are,  in  a  sense,  Democratic  trusts.'^  If 
trusts  are  corrupt  and  degenerate,  the  Democrats  are  as 
deep  in  the  mud  as  the  Eepublicans  are  in  tlie  mire.  Per- 
haps the  greatest  of  the  Xapoleons  of  finance  now  engaged 
in  the  business  of  consolidating  and  combhiing  is  a  former 
Democratic  Secretary  of  the  Xavy.  Xot  a  month  passes 
that  the  press  reports  do  not  mention  his  connection 
with  some  great  trust.  This  spring  has  witnessed  the 
absorption  by  the  Metropolitan  Street  Eailway  Company 
of  Xew  York  City  of  the  Third  Avenue  system,  its  only 
rival.  All  the  surface  railways  of  that  city — Xew  York 
City  proper — are  now  under  the  control  of  this  one  cor- 
poration of  Avhich  this  ex-Secretary  of  the  Xavy  is  the  lend- 
ing financial  genius.  The  Standard  Oil  Company  is  con- 
sidered the  greatest  of  trusts.  It  is  the  one  accused  of  tlic 
most  evil  practices.  It  has  even  been  chaiged  with  interfer- 
ing in  pr)linfs.  The  most  specific  charge  was  tlie  one 
which  alles-cd  that  tliroudi  its  intluence  a  certain  Demo- 


Whose  Fault  is  it  ?  235 

crat  of  Ohio,  ^ras  elected  United  States  Senator.  Ex- 
Governor  I'lower,  cx-Seeretary  of  State  Olney,  and  hosts 
of  others  whom  the  Democratic  jjarty  has  honored  and  en- 
trusted witli  oflice,  have  heen  active  in  promoting  or  man- 
aging  trusts  and  consolidations.  This  is  perhaps  no  re- 
flection on  these  successful  gentlemen  in  the  eyes  of  any 
person,  except  in  the  eyes  of  those  who  denounce  trusts. 
Very  likely  trusts  should  be  denounced,  but  people  in 
denouncing  should  bear  in  mind  the  scriptural  injunction 
as  to  pulling  motes  out  of  their  brother's  eye  while  beams 
are  in  their  own  eyes. 

])uring  the  last  two  months  that  have  just  passed  (April- 
May,   1900)  two  trusts  have  been  very  much  before  the 
pu])lic,  the  American  Steel  and  Wire  Company  and  the 
American  Ice  Company.    The  head  of  the  former  has  been 
accused  of  circulating  misleading  reports  concerning  the 
condition  of  his  company  and  its  business  prospects,  and 
of  arbitrarily  closing  many  of  the  mills  of  the  company  to 
make  it  appear  that  there  had  l)een  an  over-production  and 
thereby  to  dejiress  the  price  of  stock.    It  is  only  fair  to  say 
that  he  has  been  acquitted.     This  man  is  a  Republican. 
The  American  Ice  Company,  the  other  trust  that  is  in  the 
public  eye  at  present,  has  as  near  a  complete  monopoly,  in 
a  certain  locality,  of  one  of  the  greatest  of  life's  necessities, 
as  anv  trust  ever  secured.     Taking  advantage  of  docking 
facilities  which   it   has   been   able    to   acquire   and   which 
were  of  an   exc]\isive  character,  and   of   its  pr).5session    of 
nearly   the  entire  supply  of   ice  avnilablo   for  Xew  York 
Citv.   and   of  all   of  the   important    ice-making  establish- 
ments, it  has  (loul)le(l   the   j^rice  of  ice. — an  extortionate 
increase,  vielding  to  tlie  trust   inordinate  profits.     Of  all 
monopolies  this  is  the  most  Tner(Mles~.     It  lays  its  burden 
most  henvilv  on  the  poor,  the  sick,  and  tho  youn::.     The 
fcvcr-strickcn  patient  is  dealt  the  heaviest  blow,  but  even 


236  The  Trusts 

the  strong  and  well,  find  health  and  life,  in  the  warm  ?nin- 
mer  days,  endangered  by  food  and  drink  that  are  tainted 
because  of  lack  of  ice  to  preserve  its  wholesomeness.   Trusts 
have  often  been  characterized  as  "  octopi,""  but  the  Ameri- 
can Ice  Company  is  the  most  vampire-like  sucker  of  human 
blood  that  has  ever  been  incorporated.    In  its  organization, 
as  well  as  in  its  methods,  it  exemplifies  the  worst  evils  of 
trusts;  for  banded  together  in  this  company,  with  others, 
are  several  whose  oilicial  duties  make  them  the  guardians 
of  the  people's  interest.     It  is  freely  charged,  and  to  this 
day  it  has  never  been  denied,  that  many  officials  of  New 
York  City  are  stockliolders,  and  that  it  is  the  exceptional 
privileges  which  their  influence  has  given  to  the  trust  th  -i, 
with  other  ])owers,  make  it  so  monopolistic.     It  is  charged 
that  persons  connected  with  the  Municipal  Assembly  or  the 
Commo7i  Council  of  Xew  York  are  stockholders,  and  yet  at 
one  time  the  practical  method  of  immediate  relief  seemed 
to  be  the  establishment  l)y  the  mtinicipal  government  of 
the  city  of  Xevr  York  of  city  plants  for  manufacturing 
ice.      It  is  charged — -and  not   denied- — that  many  of  the 
judges  of  Xew  York  City  are  or  have  been  stnekholders  of 
tlic  American  Ice  Company,  and  yet  not  only  is  that  com- 
pany to-day  lieing  arraigned  before  the  people  as  a  merci- 
less corporation,  but  criminal  proceedings  are  pending  in 
the  inferior  courts  which  may — or,  at  least,  might  have — • 
come  before  these  judges  for  trial  or  review.     Furthermore, 
prr-ccc'lings  are  pending  before  the  Attomey-Ceneral   of 
tlio  Stale,  preparatory  to  an  action  to  procure  a  dissolution 
of  tlip  corporation.     Should  such  an  action  be  instituted, 
it  nii,<rhl  bo  tlie  duty  of  some  of  these  judges  to  try  it,  and 
it  wnidd.  perhaps,  have  been  brou2"ht  before  them,  had  not 
rumor  ;)-~orM:iiPf!  ih^m  with  the  trust.     Trusts  invariably 
?('(■]■:  \n  allv  ili.-'nisr'lvc-  wiih   i1io  dom.itiani-  jtolifir'al  party 
of  tlie  locality  in  ^\hich  tlioy  are  to  operate,  and  ihe  Am:^ri- 


Whose  Fault  Is  it?  237 

can  Ice  Company  is  unquestionably  a  Democratic  trust,  in 

the  sense  of  havint^  amon;t,^  its  principal  stockholders  very 
many  of  the  leaders  of  that  party  in  (Jreater  Xew  York. 

In  the  face  of  active  participation  in  a  trust  that  exer- 
cises its  great  powers  with  the  iiihuman  greed  wliich  has 
characterized  the  American  Ice  Company,  denunciations 
of  trusts  in  phit forms  framed  by  tliese  men,  or  the  advocacy 
by  them  of  statutes  tilled  with  prohibitions  of  trusts,  can 
l»e  eonsidered  only  as  ])rofessions  whicdL  do  not  s(piare  with 
jjt-rformance.  \\'hen  the  trust  otfenders  are  being  excori- 
ated, Kepublicans  should  not  be  denounced  as  spt.-cially 
guilty  or  as  sinners  in  this  respect  above  all  othei'  men. 
The  pot  should  not  call  the  kettle  black. 

Xot  only  ai'c  individual  Republicans  no  more  interested 
in  tru>ts  ihan  Democrats,  the  licpublicans  have  not  been 
particularly  favorable  towards  trusts  in  their  olbcial  party 
stateinents, — tlieir  ])latforms.  The  Neiv  Yurh  World 
Almanac  for  1  !)<)(),  gives  the  following  })lanks  from  plat- 
forms adopted  at  Eepubliean  State  Conventions  held  in 
1899,  in  so  far  as  they  relate  to  trusts: 

lowii To  maintain   the   welfare  of  the  people   is   the   object  of 

all  poverniiients.  Industry  and  coininercf^  shniild  be  left  free  to 
pursue  their  inetlnul  according  to  the  natural  laws  of  the  world, 
but  when  the  business  agj^repit  ions  known  as  trusts  prove  hurtful 
to  tlie  peojih;  they  must  be  restrained  by  National  laws,  and  if  need 
be,  abolislied. 

Kentucky. — \\"e  pled^re  the  ]\epul)lican  jjarty  of  Kentucky  to 
the  enactment  of  all  >ucli  laws  as  may  be  necessary  to  prevent 
trusts,  pools,  comliinations  or  other  oi'i^'ani/ations  from  combininn; 
to  depreciate  below  its  real  value  or  to  enhance  tlie  cost  of  any 
artich\  or  to  reduce  the  projier  emoluments  of  labor. 

Maryland. — We  stron^rly  favor  laws  to  successfully  suppress 
trusts  and  all  t'oinbinat ions  uliieh  cr(Mi1(>  monoiioly.  It  \nin  Ihr 
licpiihJicdn  jxirtji  irliiili  jinssrd  tJir  FnUnil  luir  (i(iainst  trusts  and 
which  is  nilnrcinij  it  so  fur  (ts  statrs'  riijlils  jimnit. 

Massachusetts. — The  Jlcpublican   party   of  Massachusetts   is   un- 


238  The  Trusts 

qiialifiedly  opposed  to  trusts  and  monopoly,  and  the  capitalization 
of  fictitious  and  speculative  valuations,  and  reiterates  its  declara- 
tion in  the  platform  of  1894  against  stock-watering  in  all  forms, 
and  points  to  tlie  existing  legislation,. and  especially  to  the  anti- 
stock-watering  laics  of  that  year  passed  hy  a  Republican  legisla- 
ture and  signed  by  a  Republican  governor,  as  proof  of  its  progress, 
sincerity,  ivisdom  and  courage  upon  this  issue.  It  believes  that 
similar  laws  enacted  by  all  the  states  in  connection  with  the  Fed- 
eral Trust  law  already  passed  by  a  Kepublican  Congress  would  put 
an  end  to  the  danger  from  tlie  growth  of  greiit  combinations  and 
trusts. 

Nebraska. — The  Republican  party  now,  as  always,  opposes  trusts 
and  combinations  having  for  tlieir  purpose  the  stilling  of  competi- 
tion and  arbitrarily  controlling  production  or  fixing  prices,  but  we 
also  recognize  that  legitimate  business  interests,  fairly  capitalized 
and  honestly  managed,  have  built  up  our  industries  at  home,  given 
the  largest  employment  to  labor  at  tlie  liighest  wage,  and  have 
enabled  us  to  successfully  compete  Vi  ith  foreign  countries  in  the 
markets  of  tlie  world. 

Ohio. — We  commend  the  action  of  the  Seventy-third  General 
Assembly  of  Ohio  in  passing  the  stringent  law  now  on  our  statute 
hooks,  prohibiting  the  organization  of  trusts,  and  we  denounce  such 
unlawful  combinations  as  inimical  to  the  interests  of  tlie  people. 

The  platforms  adopted  this  year  of  1900,  show  that  both 
parties  are  alike  unfavorable  to  trusts.  There  is  liardl)'' 
a  single  state  in  which  during  the  present  year  both  noliti- 
ca]  parties  have  not  denounced  trusts.  Tlie  declaration  of 
the  Republican  party  in  its  Xational  platform  adopted  at 
Philadelphia,  on  June  20th,  is  as  follows: 

We  recognize  the  necessity  and  propriety  of  the  honest  co-opera- 
tion of  cajiital  to  meet  new  business  conditions  and  especially  to 
extend  our  ra])i(lly  increasing  foreign  trade,  but  we  condenm  all 
(■on>j)iracic>  and  comljinations  intended  to  restrict  business,  to 
create  monopolies,  to  limit  production,  or  to  control  jiriccs,  and  favor 
such  legislation  as  will  efl'ectively  restrain  and  prevent  all  such 
abuses,  protect  ami  fironiote  competiticm  and  secure  the  rights  of 
jirodueers,  lalxjrers  and  all  wlio  are  engaged  in  industry  and  com- 
mereo. 


Whose  Fault  is  it  ?  239 

Republicans  show  as  little  real  friendship  for  trusts  as 
do  the  Democrats.  Their  platforms  do  manifest  a  willing- 
ness to  study  into  the  new  jjroblems  occasioned  by  them. 
They  do  show  a  disposition  not  to  rush  headlong  on  ^ 
course  that  may  prove  harmful,  but  they  manifest  quite  as 
nuu-li  of  a  desire  to  remedy  existing  evils  as  do  the  Demo- 
cr:;ts,  and  iliey  are  able  to  show  legislation  of  a  practical 
chai'acter 

It  is  still  questionable  just  what  sort  of  legislation  should 
be  enacted.  The  abundance  of  laws  against  trusts  passed 
by  any  ])arty,  does  not  conclusively  prove  that  that  party 
has  conferred  a  service  on  tlie  people.  Yet  Republican  leg- 
islatures have  been  (juit(>  as  prolific  in  trust  legislation  as 
have  tlie  Democratic.  The  so-called  "anti-trust  act"  of 
the  I'Uited  States,  being  the  act  passed  in  189U,  entitled 
"  An  Act  to  I'rotect  Tratle  and  Commerce  against  Unlaw- 
ful Restraint  and  ]\li)nopoly/'  was  introduced  by,  and  its 
passage  due  to,  tliat  life-long  Republican,  John  Sherman, 
and  it  is  known  by  his  name.  ]jut  the  Republicans  have 
not  been  content  witli  tlie  Sherman  Act.  The  present  ses- 
sion of  Congress  has  seen  them  diligently  trying  to  do 
sometliing  whicli  would  ])e  an  efficient  remedy.  They  have 
pro])osed  an  amendment  to  the  Constitution  giving  to  the 
Federal  government  al)solute  power  over  corporations, 
tru-ts.  and  Ciunbines.  even  to  tlie  extent  of  destroying 
them;  and  hnve  introduced  a  bill  of  the  most  drastic 
character  ameiiding  the  existing  Sherman  Act.  It  is  use- 
less here  to  consith^r  whether  the  ]n-o]v>-ed  law  is  wise  or 
not,  but  tliis  mucli  can  be  truthfully  said:  it  is  no  more 
drastic,  vet  quite  as  drastic,  as  the  denunci;itions  of  trusts 
in  Democratic  platforms.  In.  the  Judiciary  Conmiittee, 
the  Democrats  have  vot(Ml  solidly  against  this  proposed 
amendment  to  the  Constitution,  on  the  ground  that  it  is 
an    invasion    of    state    rights:    and    more    recently    every 


240  The  Trusts 

Democratic  member  of  the  House,  except  five,  has  voted 
against  this  prq^osed  amendment.  As  it  required  a  two- 
thirds  vote,  it  was  killed.  Every  well-informed  person 
knows  that  if  the  remedy  against  trusts  is  to  be  found  in 
legislation,  it  must  be  in  Federal  legislation.  It  is  abso- 
lutely impossible  to  procure  uniformity  of  legislation  in 
all,  or  even  in  very  many,  of  the  forty-five  states  of  the 
Union,  and  if  one  state  permits  the  creation  of  great  cor- 
porate trusts  within  its  bounds,  then  under  the  various 
clauses  of  the  United  States  Constitution  as  to  interstate 
commerce  being  regulated  only  by  Congress,  and  as  to  the 
rights  of  persons  to  life,  liberty,  and  property  being  in- 
violable by  state  legislatures,  and  under  that  comity  which 
has  always  existed  between  states,  notwithstanding  the 
fact  that  states  may  possibly  have  tlie  right  to  impose  upon 
corporations  created  by  other  states  the  same  restrictions 
which  they  place  upon  their  own  corporations  before  al- 
lowing them  to  maintain  offices  or  acquire  domiciles  within 
their  borders,  the  states,  nevertheless,  cannot  effectively 
prevent  these  corporations  created  by  other  states  from 
doing  business  with  the  citizens  of  each  and  even'  state. 
Trust  legislation,  to  be  effective,  must  be  ISTational.  Not 
only  do  the  political  relations  of  the  states  towards  each 
other  and  towards  tlie  Union,  as  established  by  the  Con- 
stitution, necessitate  this,  but  the  growing  intimacv  of 
interstate  business  relations  requires  it.  One^s  trade  and 
market  arc  now  in  no  way  1)ounded  or  limited  l)y  state 
lines,  and  the  laws  aifecting  business  organizations  should 
])e  a?  extensive  in  tlieir  jurisdiction  as  our  domestic  trade. 
If  state  laws  cannot  reach  every  person  and  corporation 
tliat  ]ia<  a  riglit  to  trade  in  that  state,  wo  must  have 
Xational  laws.  If  tlie  Democracy  is  so  attached  to  the 
tlieory  of  state  rights  as  to  vote  against  giving  to  the 
Federal  government,  power  over  the  trusts  which  to-day 


Whose  Fault  is  it?  24I 

spread  over  the  whole  country  and  which  do  business  in 
all  .sections,  they  sacrifice  the  })ractical  to  the  theoretical, 
and  show  the  ntter  incai)acity  of  tlreir  party  to  deal  with 
new  and  vital  questions  of  momentous  importance.  No 
Ioniser  need  the  |)arty  which  fears  to  <?ive  to  the  Federal 
gov(>rnnient  power  to  deal  with  trusts,  prate  of  its  anti- 
trust notions,  or  seek  to  make  it  an  issue  of  Xational  poli- 
tics. "State  riijjlits "  is  a  tlieory  which  every  invention 
that  facilitates  trans]:)ortation  and  travel  tends  to  shatter. 
He  who  lets  it  stand  in  the  way  of  edicient  remedies  for 
actual  evils,  is  a  "  mister  man-afraid-of-a-shadow." 

In  an  article  in  The  Xorth  American  Rcvieiv  for  Septem- 
Irm-,  is;)!),  on  the  Legal  As})ects  of  Trusts,  Jos.  S.  Auer- 
Lacli  says: 

'■  Xeitlier  political  ])arty  olFers  any  prolectioii  (to  trusts).  Each 
apparently  would  out-do  the  other  in  its  bid  for  pviblic  support. 
New  York,  if  shouting  less,  is  about  as  active  as  Texas.  Democrats 
logislatf  and  Republican  governors  sign;  Republicans  legislate  and 
Democratic  governors  sign."' 

The  facts  of  the  case  certainly  do  not  justify  the  Demo- 
crats calling  the  Kepuhlican  party,  the  party  of  trusts. 

The  evils  of  trusts,  as  has  been  particularly  pointed  out 
hy  Bourke  Cochran,  are  largely  the  evils  of  cor])orations. 
M'hich  are  the  states  that  to-day  are  most  lax  in  their  con- 
ti'ol  of  cor})orations?  Fnder  tlie  laws  of  which  states  do  the 
great  trusts  st'ck  incorporat ion ?  Democratic  New  Jersey 
ami  Democratic  I)elawar(\  Mr.  ]')ryan,  at  the  Chicago 
Trust  Coufei'iMUH',  altempttMl  to  ])an-y  a  thrust  on  this 
])oiut,  intruded  into  his  address  hy  a  ()uery  from  the  gal- 
lery, with  the  remark  that  .New  Jersey  and  Dehtware  were 
not  Denuicratic  in  IS'.Ui.  lUit  until  ISi).")  New  Jersey  had 
liad  hut  one  IJepuhlican  (iovernoi-.  and  that  was  in  "•war 
times.""  It  was  thi^  most  rock-rihhed  Democratic  state  in 
the  Xorth.     This  fact  is  of  interest  in  connection  with  the 


242  The  Trusts 

following  from  a  recent  able  address  by  Edward  Quinton 
Keasby,  a  well-known  Xew  Jersey  lawyer,  upoii  the  cor- 
poration laws  of  that  state  and  upon  trusts: 

"  The  first  fact  to  be  noted  in  the  inquiry  into  the  policy  of  Xew 
Jersey  with  regard  to  corporations  is  that  there  is  nothing  of  much 
<-onsequence  that  is  new  in  her  existing  laics.  The  large  companies 
lately  incorporated  were  organized  under  a  general  law  which,  in  its 
substantial  features,  has  been  in  force  ever  since  ISJfG,  and  which 
has  been  unchanged  in  any  very  important  particulars  during  the 
last  twenty-five  years. 

"...  A  general  act,  as  I  have  said,  was  passed  in  1S46,  and  the 
power  to  grant  special  charters  was  abolislied  in  1S75,  and  in  that 
year  a  revision  of  all  the  general  acts  concerning  corporations  was 
made  and  permission  was  given  to  any  persons  to  form  corporations 
for  any  lawful  business  or  purpose  whatsoever.  The  provisions  of 
that  act  were  suhstantially  the  same  as  those  of  the  earlier  statutes, 
and  these  pi-ovisions  have  remained  substantially  unchanged  until 
the  present  day." 

Democrats  who  assail  trusts  ought  not  to  charge  their 
existence  up  to  Hepublieans.  Reference  has  been  made  in 
a  former  chapter  to  the  laxity  of  the  laws  of  Delaware. 
Ovor-capitalization  is  the  chief  cause  of  tlie  great  trusts. 
It  encourages  "  promoters,"  gives  to  them  a  cliance  to 
make  enormous  fortunes,  but  is  an  irresistible  temptation 
to  wholesale  frauds.  If  the  worst  of  the  trusts  are  to  be 
C  stroyed,  if  the  worst  that  is  in  trusts  is  to  be  eliminated, 
the  laws  of  Xew  Jersey  and  Delaware  ought  to  be  amended. 

Of  late  it  has  been  frequently  charged  that  tlie  Repub- 
lican jjarty  is  responsible  for  trusts  because  it  has  advo- 
cated a  protective  tariff,  and  the  tariff,  it  is  said,  sluits  out 
foreign  goods  which  might  compete  with  trusts  and  destroy 
their  )io\ver.  "S\v.  Ilavemeyor,  the  sngar  king,  has  testified 
before  a  Senate  Comniittee  that  '"  the  tariff  is  the  mother 
of  trusts."'  The  assertion  coniiiig  from  (me  whos(;  efforts 
to  secure  protection,  when  the  Wilson  tariff  bill  was  passed, 


Whose  Fault  is  it  ?  243 

caused  such  a  commotion,  seems  incongruous;  and  it  is  im- 
possible to  resist  the  conclusion  that  'Mr.  llavemeyer  has  a 
grud,ije  against  the  tariff  l)ecause  it  makes  him  pay  too 
much  for  raw  sugar,  or  because  the  shoe  pinches  in  some 
other  s])ot.  Mr.  llavemeyer  undoubtedly  feels  that  his 
])o\verful  trust  could  stand  free  trade  in  refined  sugar  bet- 
ter than  some  of  his  weak  competitors,  and  he  probably  has 
little  objection  to  free  trade  in  raw  sugar,  since  it  would 
tend  to  give  a  death-blow  to  the  beet-sugar  industry.  It 
should  not  be  forgotten  that  even  if  some  of  the  trusts 
have  taken  advantage  of  the  tariff,  the  Kepublican  party  is 
not  to  be  blamed  therefor.  A  great  majority  of  the  very 
large  trusts  have  been  formed  within  three  years.  There 
has  not  yet  been  ample  time  to  see  whether  trusts  are 
taking  advantage  oC  the  tariff,  or,  if  that  is  the  case,  to 
enact  legislation  to  correct  the  abuse.  The  tariff  ])lank  of 
the  Kepublican  platform,  189(5,  correctly  said  of  the  tariff 
that 

"  in  its  reasonable  application,  it  is  just,  fair  and  impartial,  equally 
opposed  to  forciijn  coiifral  iind  (lonnstic  monopoly,  to  sectional  dis- 
criiiiiiiation  ajid  individual  favoritism."  It  also  declarcil:  '"We  re- 
new and  cinpliasize  our  allofjiance  to  tlie  policy  of  protection  as 
the  bulwark  of  American  industrial  inde])endence  and  the  founda- 
tion of  American  develo])ment  and  j)rosperity.  Tliis  true  American 
j)oIi(y  taxes  forei^ni  products  and  encourafjes  liome  industry;  it 
])uts  tlie  burden  of  revenue  on  f(jrci<,ni  (,'oods;  it  secures  the  Ameri- 
can markid.  for  the  American  j)roducer:  it  upliolds  tlie  American 
standard  of  wa^es  for  the  American  workiiirrman :  it  puts  the 
factory  by  the  side  of  tlie  farm  and  malcc^  the  American  farmer 
//.s'.v  dcjirndvnt  on  forcujn  dimand  ami  jiriir ;  it  diffuses  general 
thrift  and  founds  the  streiiLrth  uf  all  on  tlie  strength  of  each." 

Xot  only  lias  the  Ee]niblican  party  in  its  ]datform  de- 
clared against  any  tariff  which  was  creative  of  monopolies, 
but  some  of  its  most  eminent  numiliers  have  spoken  em- 
pliatically  in  tlu,'  same  strain.     J(diu  Sherman,  the  former 


244  The  Trusts 

Republican  Secretary  of  the  Treasury,  and  for  years  Ke- 
puLlican  Senator  from  Ohio,  has  used  the  following  lan- 
guage: 

"  Tlie  primary  object  of  a  protective  tariff  is  to  provide  for  the 
fullest  competition  by  individuals  and  corporations  in  domestic 
production.  If  such  individuals  or  corporations  combine  to  advance 
the  price  of  the  domestic  product  and  to  prevent  the  free  result  of 
open  and  fair  competition,  I  would  without  a  moment's  hesitation 
reduce  the  duties  of  foreign  goods  competing  with  them,  in  order 
to  break  down  the  combination.  Whenever  this  free  competition  is 
evaded  or  avoided  by  combination  of  individuals  or  corporations, 
the  duty  should  be  reduced  and  foreign  competition  promptly  in- 
vited." 

Charles  Foster,  Eepublican  ex-Covernor  of  Ohio  and 
ex-Secretary  of  the  Treasury,  has  declared  himself  as  fol- 
lows: 

'■'  While  I  have  always  been,  and  am  yet,  a  thorough  believer  in 
the  protective  policy,  I  regard  the  appropriation  of  the  tariff  to 
enhance  the  price  of  any  product  of  the  country,  as  a  misuse  of  the 
purpose  intended.  When  any  trust  shall  avail  itself  of  a  tax  upon 
imports  to  enhance  the  price  of  the  product,  then  the  tax  should 
be  modified  or  wholly  removed." 

The  tariff  lias,  perhaps,  indirectly  been  the  cause  of 
trusts.  It  lias  stimulated  the  building  of  factories  and 
mills  in  various  industries.  It  has  made  a  profit  reason- 
ably certain,  so  far  as  foi'eign  competition  goes;  but,  as  in 
every  business,  far  more  com])etitors  have  .sprung  up  than 
were  needed  to  supply  the  market.  Over-production  has 
ensued.  Profits  have  Ijccn  lost,  plants  have  proven  poor 
investmenis,  and,  to  save  tliciiiselves  from  bankruptcy, 
manufactnrers  have  formed  trusts.  It  is  the  fierceness  of 
hr)nie  com]xjtition  tliat  has  cnnsfd  ilie  trusts.  J^ut  to  say 
that  the  tariff  has  been  in  this  way  responsible  for  trusts 
is  like  saying  iliat  food  is  responsible  for  apo[)l('xy  and 
goub.   since  it  is  usually  the  hearty  eater  who  is  affected 


Whose  Fault  is  it  ?  245 

witli  these  diseases.  Tlie  trouble  is  not  in  the  foocl,  but  in 
over-calintr.  il  is  not  always  in  the  tariil".  It  is  fre- 
quently in  excessive  eonipctition. 

It  is  said,  however,  that  the  tariff  is  the  defense  and  prop 
of  trusts,  if  not  their  cause;  that  Ijy  shuttin^tr  out  the  for- 
ei,un  product  it  makes  it  all  the  easier  for  the  American 
trust  to  monopolize  the  article  and  to  maintain  high 
prices.  It  is  c!!ar<:^ed  that  an  iniquitous  tariff  is  the  sup- 
]>ort  of  tlu>  trusts,  and  ^Mr.  Lawson  Purdy,  of  the  New  York 
'L'ariif  I*eforui  Lea^rue,  asserts  that  of  the  more  tlian  four 
hundred  trusts  enumerated  in  The  Commercial  Year  Bool', 
more  than  two-thirds  are  directly  affected  by  the  tariff  and 
that  there  are  \cv\  few  of  them  that  do  not  get  some  tarift 
assistaiU'C  directly  or  indirectly.  It  is  unquestionably  true 
that  the  existeiu'o  of  the  taritf  tends  to  shut  out  foreign 
(■umpetition  aud  to  (uuible  the  home  producer  for  a  time 
to  charge  high  prices,  that  is,  higher  than  those  of  Euro- 
])ean.  countries,  with  their  ])oor]y  paid  labor;  but  in  a 
country  so  great  as  ours,  and  with  capital  so  abundant, 
iliorc  is  always  a  prol)ability  of  vast  internal  competition, 
in-riviilpj  llie  tariff  i.<  mainiained.  If  the  tarilf  is  abolished 
anil  if  froreign  producers  can,  in  fact,  produce  so  as  to  sell 
I'.ore  clieaply.  then  there  is  little  hope  of  the  s]U'inging 
i'!i  of  lunv  (himcstic  competition.  I'he  lucans  which  the 
liiritf  rct'oi'incr  would  employ  for  the  purpose  of  i-educing 
;)ricus,  wiiiiM  iiPMii  the  destruction  ot'  American  industries. 

That  there  liave  l)i>en  abu>es  of  the  taritf  by  some  of  our 
jirnieeted  ii.idiK-'.ries  >(HMns  ((iiite  certain.  It  is  a  well- 
known  fad  that  foi'  many  years  various  lines  of  manufac- 
lureil  good,-  have  at  times  heen  sold  for  export  abroad  at 
jDwcr  prices  than  at  home.  Taritf  reformers,  like  Lawson 
Ihiidy  and  !\vrnii  W.  Holt,  have  made  \\\\>  .-latement  and 
iiave  citi"!  numerous  in,-tanee.-  as  ]iroof  of  the  charge. 

I'hat    our   export    })rices    have   oecasionally   been   lower 


246  The  Trusts 

than  domestic  prices,  was  admitted  in  a  recent  address  by 
Samuel  Adams  Kobinson,  of  the  American  Protective 
Tarill;  League,  but  his  explanation  is,  that  this  course  was 
exceptional;  that  it  occurred  in  the  four  years  of  depres- 
sion following  the  free  trade  triumph  of  1893,  when  Amer- 
ican manufacturers  were  compelled  to  sacrifice  profits  to 
a  considerable  extent  in  order  to  find  a  foreign  outlet  for 
their  surplus  products;  that  these  years,  during  the  admin- 
istration of  President  Cleveland  and  the  agitation  attend- 
ant upon  the  repeal  of  the  AIcKinley  law  and  the  passage 
of  the  Wilson  tariff  bill,  so  unsettled  American  business 
affairs  that  the  period  became  one  of  national  over-produc- 
tion and  under-consumption;  that  the  purchasing  and  con- 
suming power  of  the  nation,  as  a  result  of  the  stagnation 
of  business,  became  greatly  diminished,  and,  in  conse- 
quence, manufacturers  and  other  producers  were  compelled 
to  reduce  prices  below  the  point  of  fair  profits  in  order  to 
obtain  ready  money,  and  in  this  way  only  were  they  able 
to  keep  their  plants  in  operation  and  their  labor  employed. 
Goods  were  marketed  abroad,  so  Mr.  Kobinson  concedes,  at 
figures  which  left  little  or  no  margin  of  profit,  and  some- 
times at  an  actual  loss.  But  it  is  contended  that  now, 
with  prosperity  at  hand,  export  prices  arc  "  much  nearer 
on  a  parity  with  domestic  prices;''  and  the  following  rea- 
sons are  given  for  the  allowance  by  manufacturers  of 
greater  discounts  on  goods  sold  for  export  than  on  those 
sold  to  domestic  consumers,  viz.,  ''  spot  cash  payment  for 
export  goods,  whereas  in  domestic  trade  long  credits  are 
the  rule  and  spot  cash  tlie  exception;  and  the  ad(]ition;il 
fact  tlint  in  marketing  his  product  through  the  exjjon 
trade,  tlie  manufacturer  is  at  no  expense  for  advcrti.-ing, 
maintenance  of  agencies  and  other  ittms  tliat  add  to  the 
cost  of  distrilnition,  amounting  in  t!ie  aggregate  t')   ful'y 


Whose  Fault  is  it  ?  247 

t'ho  difference  between  tlic  export  prices  and  domestic 
prices."     Such  is  Mr.  Kobinson's  argument. 

While  occasionally  there  nuiy  he  special  circumstances 
and  exce])tional  conditioiis  which  justify  American  manu- 
facturers in  these  discrepancies  in  prices,  and  while  it  is 
true  that  after  a  given  quantity  has  been  manufactured  a 
surplus  may  be  made  and  sold  at  a  lower  rate,  yet  the  pre- 
sumption must  always  be  that  when  American  goods  arc 
sliijiped  in  largo  quantities  abroad,  and  sold  for  less  than 
in  the  home  market,  the  producer  is  gouging  the  Ameri- 
can peo])le;  and  that  the  tariff  is  not  a  necessity  to  the 
maintenance  of  such  a  1)usiness,  but  that  it  may  be  a  means 
of  robbery  and  extortion.  This  presumption  becomes  con- 
clusive when  any  American  ])roduct  is  thus  uniformly  sold 
abroad.  For  the  head  of  any  industry  which  has  been 
fosicred  by  an  American  protective  tariff  thus  to  rob  the 
American  people  is  the  case  of  a  dog  biting  the  hand  that 
feed>  it.  It  is  the  people  and  not  the  manufacturers  in 
such  cases  that  need  protection.  The  continuance  of  the 
tariff  u]ion  an  article  sold  abroad  cheaper  than  at  home 
can  be  justified  only  by  the  clearest  evidence,  brought  out 
afior  the  fullest  and  fair(>st  investigation,  establishin'.r  he- 
voiid  a  shadow  of  a  doubt  that  such  sales  are  unusual  and 
exceptional;  and  that  the  ability  t(^  undersell  jiroducers 
niiii  other  coniju'tilors  in  the  forcM'im  markets  is  due  to 
icinporary  market  conditions. 

Althougli,  in  all  cases  where  domestic  ]iroducers  have 
built  up  a  foreign  trad(\  and  have  uniff)rmly  sold  in  a  for- 
eic'n  mai'kiM  at  a  le^s  rate  than  in  tlie  home  market,  they 
have  conclnsively  demonstrated  tlieir  indeiiendonce  of  the 
tnriff.  and  tlie  taritf  should  therefore  1n^  removed  or  low- 
ered, vet  to  ndvor;it(^  free  trade  or  a  general  reduction  of 
larilV  duties  on  all  ]n-oducts.  or  upon  the  majority  of  our 
im]iorts,  as  a  cure  for  trust   evils,  would  be  the  height  of 


248  The  Trusts 

folly.  It  would  be  a  remedy  illogical  in  principle,  and  it 
would  be  worse  than  criminal,  because  it  would  bo  to 
ignore  all  the  lessons  of  experience.  The  remedy  for  trust 
oppression  is  not  to  be  found  in  the  death  of  competition. 
But  if  the  tariff  is  removed  so  that  foreign  competition 
may  be  potent,  the  foreign  competition  -vnll  crush  out 
domestic  enterprises,  if,  indeed,  the  foreigner  is  the  cheap 
producer  and  can  sell  at  a  lower  price,  as  the  would-be 
destroyer  of  the  trusts  and  the  tariff  contends.  The  evil 
of  the  trust  is  that  it  so  limits  competition  as  to  become 
apparently,  if  not  in  reality,  a  monopoly.  The  effect  of 
the  tariff,  it  is  true,  is  to  shut  out  foreign  competition. 
But  a  century  of  experience  has  proven  to  the  people  of 
the  United  States  that,  while  the  tariff  limits  foreign  com- 
petition, it  has  built  up  and  fostered  domestic  competition. 
The  trusts  may  strive  to  kill  that  competition;  but  our  ex- 
perience with  them  proves  that  they  can  not  permanently 
do  this.  It  is  not  possi])le  for  them  for  any  length  of  time 
to  destroy  even  American  competition,  so  great  is  the 
amount  of  uninvested  American  capital,  so  limitless  the 
energy  and  enterprise  of  its  citizens.  The  only  thing  that 
has  ever  yet  been  able  to  kill  American  competition  has 
been  tlie  low  tariffs  wliicli  pcrmitiod  (he  product  of  the 
cheap  and  degraded  labor  of  Europe  to  displace  the  product 
of  American  factories.  Any  movement  to  kill  trusts  by 
the  adoption  of  general  free  trade  can  succeed  only  by 
stifling  American  industry.  It  would  kill  not  only  our 
frreat  consolidated  enterprises,  but  all  our  individual  ones. 
Whatever  may  be  the  tlioorefical  advantages  of  free  trade, 
the  practical  experience  of  tlie  American  people  has,  to  say 
the  least,  made  them  reluctant  to  try  it.  To  fijiht  (rusts 
with  freo  trade  is  to  conduct  a  cam])aif:n  with  (he  smokeless 
factory  chimney  as  the  chief  weapon;  and  whatever  nation 
makes  that  attempt,  or  whatever  party  advocates  such  a 


Whose  Fault  is  it  ?  249 

contest,  is  sure  to  go  down  in  defeat.  We  Americans  pride 
ourselves  upon  being  a  practical  people.  We  fancy  we 
know  a  good  thing  when  we  see  it;  we  are  content  to  let 
well  enough  alone.  Like  the  burnt  child,  we  dread  the 
fire.  The  great  panic  of  1893,  the  utter  depression  of 
business,  the  stagnation  of  industry,  the  wretchedness  and 
misery  that  followed  all  the  uncertainty  that  was  occa- 
sioned by  President  Cleveland's  attempts  to  change  our 
tariff  policy,  are  too  fresh  in  our  recollection  to  induce  us 
again  to  undergo  that  experience.  The  present  prosperity 
of  the  country — with  our  factories  and  mills  all  running, 
many  of  them  overtime;  with  our  exports  increasing;  with 
our  credit  unquestioned;  with  the  gold  of  the  w^orld  flowing 
into  our  country — is  something  that  we  do  not  lightly  care 
to  throw  away.  As  we  look  back  over  a  century  of  national 
development  and  industrial  progress,  we  see  periods  of  re- 
curring panics  and  find  that  they  were  always  forerun  l)y 
attempts  to  abolish  that  system  of  tariff  which  aimed  to 
protect  and  foster  industry  as  well  as  to  raise  revenue. 
We  see  that  every  attempt  to  reduce  the  tarilT  to  a  purely 
revenue  basis  resulted  in  larger  importations  of  foreign 
goods,  in  diminishing  production  of  American  articles,  in 
the  suspension  of  industries,  in  labor  unemployed,  in 
the  reduction  of  wages,  in  the  loss  of  business  confidence, 
in  an  outflowing  of  the  wealth  of  the  country,  in  a  decrease 
in  the  revenues  of  the  government,  and  uniformly  and 
without  exception  in  lessening  the  consuming  powers  of 
the  })eoplc.  But  whenever  tliere  has  been  a  tariff  large 
enough  to  represent  the  difference  between  the  American 
standard  of  living  for  the  American  workmen  and  the  de- 
graded standard  of  the  labor  of  foreign  countries,  we  have 
witnessed  a  revival  and  activity  of  American  industry;  and 
American  workingnicn  have  ])0(^n  ])rofltably  em})loved  at 
good  wages,  enabling  tliem  to  enjoy  the  comforts  of  Ameri- 


250  The  Trusts 

can  civilization  and  to  become  self-respecting,  independent 
citizens.  The  government  revenues  in  these  times  have 
always  exceeded  the  expenditures,  money  has  flowed  into 
the  countr}',  the  prosperity  of  the  manufacturer  and  wage- 
earner  has  stimulated  the  demand  for  the  raw  materials  of 
the  country,  and  the  wealth  created  by  diversified  industry 
has  brought  prosperity  and  happiness  to  the  whole  people; 
and,  further,  the  tariff  has  always  resulted  in  stimulating 
so  many  industries  that  an  active  domestic  competition  has 
arisen,  and  in  the  end  American  prices  have  been  reduced 
below  those  of  foreign  competitors. 

In  the  campaign  against  trusts  very  much  will  be  said 
against  thj  tin-plate  trust.  To  what  extent,  if  at  all,  this 
trust  is  extortionate  in  its  present  prices,  and  to  Avhat  ex- 
tent the  tariff  is  the  cause  of  it,  are  questions,  tlie  answers 
to  whicL  involve  such  a  study  of  market  prices  that  they 
do  not  fall  within  the  scope  of  this  work.  If  the  tin- 
plate  trust  is  charging  an  extortionate  price — that  is,  a 
price  which  will  yield  more  than  a  fair  profit  after  paying 
good  American  wages — then  let  the  tariff  on  its  products 
be  lowered  or  even  abolished.  But  merely  because  the 
price  of  tin-plate  has  been  greatly  advanced  during  the  last 
year  and  a  half,  we  should  not  rush  headlong  to  the  con- 
clusion that  it  is  due  to  the  tariff.  George  Gunton,  in  a 
paper  published  in  Guntorvs  Magazine  for  March,  1899,  in 
speaking  of  trusts  that  were  short-sighted  enough  to  take 
advantage  of  temporary  opportunities  to  tax  the  public  by 
increased  prices,  said  of  the  tin-plate  trust  (italics  are 
ours): 

"The  tin-plato  trust  is  ono  of  these  ofrensivo  examples.  Tliis 
is  an  industry  \\iuc)i  jiraelically  could  not  have  existed  in  this 
country  hut,  for  the  Ie;xi>Iative  aid  of  the  ])ubli<'.  Tntil  the  tarilf 
— a  very  hiirh  on(\  at.  first — was  ])laced  upon  foi-eiirn  tin.  the  tin- 
jilate  industry  liad  no  exi<tcu(e  in  the  I'nited  S(;>tcs.     It.  luis  l)e(>u 


Whose  Fault  is  it?  251 

born  and  nnrtiir(Kl  by  the  protoetivc  aid  tho  public  has  piven  it. 
Its  very  pxistcncc!  is  duo  to  the  j^ood  will  and  political  good  sense 
of  the  United  SUites.  'J'lie  tin-plate  trust  is  one  of  the  'fool  ex- 
amples '  of  using  the  trust  organization  to  ])ut  up  the  price.  Of 
course  it  would  be  unwise  for  the  public  to  hamper  a  really  help- 
ful industrial  movement  because  speculative  '  grabbers  '  get  tem- 
porary jMissession;  nor  should  a  few  mistakes  of  this  kind  be  per- 
mitted t^)  be  used  elFcctively  against  the  protective  tariff  as  a  gen- 
eral policy.  Nevertheless  it  would  be  perfectly  safe  and  tlie  part 
of  good  policy  for  Congress  to  pass  a  law  empowering  and  instruct- 
ing the  Secretary  of  the  Treasury  to  withdraw  the  protective  duty 
from  all  product,s  the  prices  of  which  are  raised  by  trust  organiza- 
tions. In  slwrt,  the  moment  a  trust  organization  raises  the  price 
of  a  product  enjoying  any  degree  of  protective  duty,  it  should 
thenceforth  be  put  upon  the  free  list  and  hccomc  subject  at  on<'e  to 
world  competition.  If  the  organizers  of  trusts  in  any  line  have  not 
economic  sense  and  jmblic  spirit  enough  to  refrain  from  using  their 
concentrated  power  to  tax  tlie  public  by  increasing  prices,  the  pub- 
lic should  at  once  withdraw  any  protective  advantage  it  lias  given 
to  that  industry.  The  primary  object  of  protection  is  to  make  it 
possible  to  stimulate  the  development  of  domestic  industries :  but 
when  industries  have  become  established  and  proceed  to  take  advan- 
tage of  this  protection  for  monop<distic,  price-raising  purposes, 
they  should  at  once  be  throtrn  on  their  oicn  eomprtitive  resources. 
This  xrould  br  in  harmony  with  strictly  economic  policy,  and  might 
hare  a  wholesome  effect  upon  the  movement  of  trust  reorganization." 

AVe  endorse  most  heartily  all  that  is  said  in  tlie  article 
that  has  heen  quoted,  in  so  far  as  it  lays  down  the  proper 
tarid'  policy  to  pursue  with  reference  to  trusts;  ])ut  it  is 
only  fair  to  say  that  two  months  later,  in  anotlier  arti(de  in 
his  ma.irazine,  (Junton  stated  iliat,  after  suhsecjucnt  in- 
vesti,iiation,  he  liad  l)ecome  satisfied  tluit  iIk^  facts  relating 
to  the  tin-platt>  trust  liad  heen  largely  misrepresented  and, 
after  carefully  considerinir,  in  this  second  article,  tho  rise 
in  the  price  of  tin-])lal(>  ami  also  tlu>  iiu'rease  in  wages 
durino;  {]io  same  period  and  tlu^  advaTict^  in  the  jirices  in  the 
raw  materials  entering  into  tin-plate_,  he  came  to  this  con- 
clusion; 


252  The  Trusts 

"  strictly  speaking,  then,  the  rise  in  wages  and  raw  material  in 
the  manufacture  of  tin-plate  has  been  slightly  more,  or  at  least 
fully  equal  to,  the  increase  in  the  price  since  the  trust  was  or- 
ganized. ITie  increased  economies  of  the  trust  probably  amount  to 
more  than  this.  They  have  probably  converted  what  was  a  loss  to 
some,  no  profit  to  many,  and  a  small  profit  to  only  a  few  into  a 
more  liberal  profit  for  all,  and  it  may  fairly  be  expected  that  the 
trust  will  share  this  undivided  profit  with  the  community  before 
long  in  a  further  reduction  of  prices.  We  are  glad,  however,  to  be 
able  to  believe  that  whatever  increased  profit  the  trust  is  now  mak- 
ing it  is  not  getting  it  out  of  the  rise  of  price. 

"  It  is  worth  noting  in  this  connection  ihat  the  price  of  tin-plate, 
with  the  increase  of  11  per  cent  in  wages,  is  still  (May,  1899)  $1.10 
a  box  less  than  it  was  when  we  relied  on  foreign  supply  for  all  our 
tin-plate  under  free  importation.  What  has  really  been  accom- 
plished is  this:  the  tin-plate  industry  has  been  transferred  to  this 
country;  whatever  profits  there  are,  now  go  to  American  invest- 
ors; the  wages  expended  in  that  industry  are  distributed  to 
American  laborers;  these  wages  have  been  increased  since  the  trust 
was  organized  11  per  cent:  the  producers  are  undoubtedly  making 
a  good  profit,  and  still  the  product  is  sold  to  American  consumers 
at  $1.10  a  box,  or  22  per  cent  less  than  before  the  tariflT  was 
adopted  and  the  trust  organized." 

If  upon  investigation  (and  certainly  the  rise  of  the  price 
of  tin-plate  dcinands  investigation),  it  should  be  found 
that  the  price  of  tin-plate  has  been  unduly  raised;  if,  as 
has  been  asserted  by  some,  the  tin-plate  trust,  through 
subsidiary  companies,  controls  the  manufacture  of  the  raw 
materials  that  enter  into  it,  and  the  increase  in  the  prices 
of  those  materials  is  only  an  indirect  way  of  concealing 
the  inordinate  profits  of  the  trust  itself,  tlien  the  tariff  on 
tin-plate  should  be  removed  at  once.  There  is,  and  there 
can  bo.  no  question  about  tliis.  Kopublicans  will  vote 
"  aye  "'  on  such  a  j)ro])osition  as  readily  as  Democrats.  BuL 
those  who  are  truly  anxious  to  remedy  those  evils  of 
trusts,  namely,  tlio  Lick  of  competition  and  the 
imposition     of     high     prices,     rather    than     to     procure 


Whose  Fault  is  it  ?  253 

the  adoption  by  the  people  of  their  theories  as  to 
free  trade,  should  never  forget  that  the  tariif  on  tin-plate 
caused  the  establishment  in  the  United  States  between  the 
time  of  the  passage  of  the  McKinley  bill  in  1891,  and  1898, 
of  forty  tin-plate  plants,  in  which  there  were  two  hundred 
and  eighty  tin-plate  mills,  and  that  the  price  ot  foreign 
tin-plate  when  it  was  on  the  free  list  just  prior  to  the 
passage  of  the  McKinley  bill  in  1891,  was  $5.10  per  box, 
Avhile  the  highest  price  that  has  ever  been  charged  by  the 
American  trust  has  been  $4.80  per  box.  Moreover,  when 
it  is  said  that  the  combination  prevents  the  establishment 
of  new  tin-plate  mills,  let  it  not  be  forgotten  that  the 
trust,  if  it  is  a  monopoly,  has  acquired  it  by  other  means 
than  the  tariff.  Let  us  quote  Byron  W.  Holt,  of  the  Xew 
England  Free  Trade  League,  who  cites  the  tin-plate  trust 
as  the  typical  trust  that  is  fostered  by  the  tariff: 

"  To  make  certain  that  they  would  be  able  to  put  and  hold  prices 
up  to  the  Dinglcy  duty  limit,  they  clinched  their  trust,  it  is  said, 
hy  itiakiug  a  five-year  contract  icith  the  producers  of  tin-plate  milU, 
which  practically  prevents  others  from  startir.jr  in  business  during 
this  period.  They  also,  through  their  relations  witli  the  chief  steel- 
bar  producing  companies,  obtained  such  control  of  this  principal 
raw  material  that  even  if  an  outsider  could  obtain  a  mill  he  would 
still  be  unable  to  produce  tin  plates  for  lack  of  raw  materials." 

It  would  thus  ap])car  that  somctliing  besides  the  tariif 
is  to  blame  even  in  this  case.  Bui  we  have  no  hesitation 
in  saving  that  whalever  mnij  have  been  the  weans  emploiied, 
if  the  tin.-])late  trust  has  a  monopoly,  aiul  if  it  is  holding 
prices  uj)  above  the  fair  profit  mark,  tlie  mono])oly  t^hould 
be  killed.  If  domestic  competition  has  been  in  any  n-aij 
strangled  and  cannot  be  revived,  tlien,  f(n'eign  competition 
should  be  courted  in  this  ])articnlar  enterprise. 

While  fiu-eign  competition  may  be  a  nu'ans  for  killing 
an  American  mon(q)oly,  is  it  sure  to  kill  trusts?     If  the 


2  54  The  Trusts 

protective  tarifl  were  removed  and  we  initiated  the  policy 
of  free  trade,  would  trusts  be  dissolved?  Would  the  vari- 
ous business  enterprises  which  now  form  them,  return  to 
the  old  methods  of  individual  production  and  distribution, 
to  unrestricted  competition  and  to  price-cutting  among 
tliemselves?  Would  not  the  result  be  as  follows?  In  so 
far  as  American  industries,  by  reason  of  the  higher  wages 
of  American  labor,  or  the  newness  of  their  enterprise,  were 
unable  to  produce  as  cheaply  as  their  foreign  competitors, 
would  not  the  incentive  to  the  establishment  in  this  coun- 
try of  new  competitive  enterprises  be  removed?  Would 
not  all  the  existing  establishments  in  those  industries, 
finding  under  free  trade  a  keener  competition,  be  more 
than  ever  compelled  to  combine  and  consolidate  and  form 
trusts  in  order  to  save  themselves,  if  possible,  from  ruin? 
Would  domestic  competition  be  left  in  those  industries  in 
which  foreigners  could,  in  fact,  produce  more  cheaply? 
Would  there  remain  the  possibility  of  any  domestic  com- 
petition in  those  industries?  There  certainly  would  not. 
AVhat  would  be  the  effect  of  the  foreign  competition?  The 
Jieads  of  tlie  existing  domestic  enterprises,  which  would 
necessarily  be  amalgamated  into  an  American  trust,  would 
make  a  fight  for  life,  a  struggle  to  keep  afloat,  and  rather 
tlian  go  into  Ijankruptcy  they  would  adopt  every  resource 
that  would  enable  them  to  escape  the  ruin.  Two  ways  of 
meeting  the  foreign  competition  would  at  once  suggest 
ihomselves,  and  would  be  immediately  adopted, — the  re- 
duction of  wages  and  the  reduction  of  tbe  ])rice  paid  for 
raw  materials.  On  the  part  of  the  employers  aiul  pro- 
ducers th(.To  would  1)0  absolute  inability  to  pay  bigh  wages 
and  bigli  prices  for  raw  materials,  and  on  the  part  of  the 
wage-fiirncr  and  the  fanner  tliero  would  be  no  means  of 
obtaining  high,  wages  and  high  prices.  It  would  be  low 
wages  or  no  work;  it  would  be  low  prices  for  raw  materials 


Whose  Fault  is  it?  255 

or  no  market.  Wage-earners  could  not  look  for  other 
employers  in  those  industries,  because  free  trade  with  na- 
tions that  were  cheaper  producers  would  be  an  obstacle  to 
the  establishment  of  new  enterprises  in  that  industry.  The 
American  farmer  would  then  find  that  he  had  but  one 
buyer,— one  buyer  now  and  no  })rospects  of  more  buyers 
in  the  future, — one  buyer,  and  even  he  could  ]je  a  buyer 
only  so  long  as  he  could  buy  most  chea])ly.  On  the  other 
hand,  if  a  tarilf  were  maintained  which  recognized  the  dif- 
ference between  the  cost  of  production  under  American 
conditions  of  labor  and  under  foreign  conditions,  there 
would  always  be,  not  only  the  possibility,  but  the  probabil- 
ity and  the  ultimate  certainty  of  the  establishment  of  new 
factories  and  new  mills  in  those  various  industries.  The 
very  possibility,  even  if  it  never  developed  into  the  actual- 
ity, would  always  tend  to  raise  wages  and  to  keep  up  the 
])rices  of  raw  materials,  while,  furthermore,  the  manufac- 
turer being  sure  of  the  great  and  valuable  American  home 
nuirket,  couUl  di>])ose  of  at  least  a  part  of  his  product  at  a 
])rofit  which  would  enaljle  him  to  recoup  the  amount  paid 
in  higli  wages  and  good  prices  for  raw  materials  The 
])rotective  tarilT  can  never  be  abolished  to  the  advantage 
of  the  American  ]M'0])le  uidil  American  labor  has  become 
as  chea])  in  ])r(nluctiv(!  power  as  that  of  the  degraded  labor 
of  1-hirope.  A\'e  are  willing  to  C(mcede  that  the  difference 
ill  the  cost  of  labor  is  by  no  means  clearly  s]iown  by  the 
dilTcrence  in  wages.  The  greater  productive  power  of  the 
American  laliorcr  may  make  liim  much  clu^aper  at  two  dol- 
lars per  dav  than  tlie  fhiglisliman  at  four  shillinirs  (i?>1.00), 
or  the  .la]i  at  ilie  ccpiivakMit  of  fifty  cents:  ])ut  we  are  sat- 
isfied tliat  notwitlistandinir  American  manufacturers  em- 
ployim:  American  labor  and  usimr  American  machinery, 
can  overcome  mucli  of  the  advantage  whicli  llie  emnlover 
of  foreign  labor  has.  vet  the  standard  of  living  of  the  Amcri- 


256  The  Trusts 

can  workingman  is  and  must  be  kept  so  much  higher  than 
that  of  the  cheaper  labor  of  Europe  and  the  degraded  labor 
of  the  Orient^  that  the  American  labor  is  more  expensive, 
and  that  a  protective  tariff  is  essential  to  the  maintenance 
of  the  standard  of  civilization  which  the  masses  of  this 
country  to-day  enjoy,  and  which,  pray  God,  they  may  never 
lower. 

Let  ug  further  consider  the  effect  of  free  trade  on 
trusts.  When  we  have  abolished  the  protective  tariff  for  the 
purpose  of  killing  trusts,  have  we  succeeded?  Very  likely 
we  have  prevented  the  creation  of  new  establishments  in 
these  industries  in  the  United  States,  and  without  doubt 
the  existing  ones  have  combined  together  to  save  them- 
selves from  extermination.  Possibly,  they  will  be  crushed 
out  by  foreign  competition;  if  so,  the  American  trust  is 
crushed,  but  American  industry  also  is  crushed.  More 
likely,  as  has  been  intimated,  in  the  desperate  struggle  for 
life,  wages  and  the  price  of  raw  materials  Avill  be  reduced 
to  the  level  paid  in  foreign  countries.  But  there  is  one 
other  possibility  or  probability,  and  that  is  international 
trusts.  AVe  already  have  them  in  many  industries,  and 
when  competition  becomes  so  fierce  that  American  in- 
dustry enters  upon  its  death  struggle,  we  will  undoubtedly 
have  more  of  them.  AVhat  would  be  the  effect  of  inter- 
national trusts  upon  American  industry?  Whenever  such 
trusts  were  formed  they  would  locate  their  machinerv  and 
capital  where  they  could  produce  most  cheaply.  All  their 
capital  and  moving  machinery  would  be  removed  to  the 
country  where  there  could  be  the  cheapest  production. 
Usually  that  would  be  the  country  where  labor  is  most 
poorly  paid.  It  would  hardly  be  America.  The  standard 
of  living  is  too  high  here  to  permit  of  extremely  low 
wages.  American  labor  is  more  intelligent  and  inventive 
and  productive  than  that  of  other  countries;  but,  though 


Whose  Fault  is  it?  257 

machines  arc  invented  largely  by  Americans,  their  use 
can  be  taught  to  the  cheap  laborers  of  Europe,  and  the 
still  cheaper  laborers  of  Japan  and  the  other  countries  of 
the  Orient.  The  capital  to  furnish  the  machines  will  go 
where  it  can  find  the  labor  that  is  cheapest  per  amount  of 
product,  unless,  by  moving,  it  is  barred  out  of  a  valuable 
market.  It  is  the  easiest  thing  in  the  world  to  take  the 
capital  abroad;  it  is  very  easy  to  move  the  machinery;  it 
is  difBcult  to  move  the  laborers,  especially  from  a  place 
where  there  prevails  a  high  standard  of  civilization  to  one 
where  they  must  accept  a  lower  standard.  To  secure  the 
American  market  to  tlie  American  manufacturer,  it  is  still 
necessary  as  to  very  many  products,  to  impose  a  tariff. 
Abolish  it,  have  free  trade,  and  if  you  have  international 
trusts  (it  is  to  be  remembered  there  are  already  some, — 
and  increased  competition  with  foreign  countries  because 
of  free  trade  moans  more),  many  American  industries  will 
be  closed  and  hundreds  of  thousands  of  laborers  will  be 
thrown  out  of  employment.  The  cheapest  seller  Avill  com- 
mand the  market,  unless  barred  out  by  a  tariff  or  embargo. 
The  American  market  is  the  best  in  the  world.  But  with- 
out a  tariff  the  Japanese  are  more  likely  to  possess  the 
American  market  than  the  Americans. 

In  considering  the  effect  of  the  tariff  on  trusts,  it  is 
to  be  noted  that  free  trade  countries,  too,  have  their  trusts, 
and,  further,  that  the  greatest  of  all  American  trusts,  the 
Standard  Oil  ("omjiany,  is  not  aided  by  the  tariff. 

To  aboli.-h  the  tariff  upon  any  article,  then,  merely  be- 
cause it  is  largely  produced  by  a  trust  would  be  an  act 
of  folly.  To  abolish  the  tarilf,  because  a  trust  has  been 
formed,  might  in  tiuu^  result  in  destr(\ving  tlu^  domestic 
trust,  for  even  if  the  prices  charged  by  this  trust  were  not  in 
excess  of  a  fair  ])i'()flt  l)ut  were  greater  than  the  j)rices  of  for- 
eign goods, — as  they  would  undo\ibtedly  be, — the  industry 


258  The  Trusts 

itself  would  ultimately  be  destroyed  by  the  abolition  of  the 
taritf.  But  to  abolish  the  tariff  on  any  article  at  any  time 
when  the  Am-erican  producers  of  it  are  charging  a  price  be- 
yond the  fair  profit  mark  after  paying  American  wages, 
whether  those  producers  be  combined  or  incorporated  as  a 
trust  or  working  separately^  is  right  and  proper  and  neces- 
sary. It  would  be  a  potent  remedy  against  extortionate 
prices.  Furthermore,  it  would  be  consistent  with  the 
theory  of  protection,  which  is  that  a  tarih'  upon  importa- 
tions of  foreign  products  will  foster  domestic  production, 
encourage  the  establishment  of  a  number  of  factories  which 
will  compete  with  each  other,  and  which  will  gradually 
perfect  their  machinery  and  methods,  until  not  unlikely 
they  will  be  able  to  produce  as  cheaply  as  their  foreign 
competitors.  The  tariff  never  was  intended — so  far  a^  its 
protective  features  are  concerned — to  bo  more  than  equal 
to  the  difference  between  the  cost  of  production  in  foreign 
countries  and  the  cost  of  production  in  the  United  States. 
It  was  intended  only  to  give  to  home  manufacturers  an 
0])portunity  to  meet  the  competition  of  foreign  manufac- 
turers. 

A  fact  pregnant  with  significance  concerning  the  tariff 
and  our  industries,  is  the  remarkable  growth  of  our  ex- 
ports of  manufactured  goods  in  recent  years.  During  the 
ten  months  ending  with  iVpril,  1899,  the  United  States  ex- 
ported about  two  hundred  and  seventy-six  million  dollars' 
wortli  of  manufactured  goods,  eighteen  per  cent  more  than 
in  the  corresponding  ten  months  of  1897  and  1898.  Tliis 
amount  consideral)ly  exceeded  the  amount  of  our  imports 
of  manufactured  goods  and  it  covered  a  wide  range  of 
products.  It  must  Ije  conceded,  we  believe,  either  that 
we  can  produce  those  products  more  chea])ly  tlian  our 
foreign  competitors,  or  else  tliat  this  great  ainriunt  of 
American  products  was  sold  to  the  foreigners  at  a  less  rate 


Whose  Fault  is  it  ?  259 

than  was  charged  to  Americans.  Xo  duty  on  these  prod- 
ucts would  appear  to  be  necessary  for  ])rotective  purposes; 
and  it  is  equally  difficult  to  see  how  any  revenue  could  be 
derived  from  articles  which  we  could  sell  so  cheaply  that 
we  export  them  instead  of  import  them. 

If  American  exports  of  manufactured  articles  for  the 
year  ending  June  1,  1900,  aggregate  $130,000,000,  as  has 
l)een  estimated,  then  there  must  be  many  articles  which 
we  can  manufacture  cheaper  than  foreigners,  and  to  re- 
tain a  tariff  upon  them  is  to  expose  Americans  to  extor- 
tion. If  such  products  are  sold  in  foreign  countries  below 
cost,  Americans  pay  the  amount  of  the  loss.  As  the  cost 
of  production  decreases,  the  rate  of  tariff  should  be  lessened 
accordingly.  If  it  is  not,  a  trust  may  be  formed  and  the 
price,  for  a  time  at  least,  kept  up  almost  to  the  point  which 
will  represent  the  cost  at  which  the  goods  produced  in  the 
foreign  country  can  be  laid  down  on  our  shores.  Trusts 
have  undoubtedly  been  formed  to  obtain  high  tariffs  and 
to  combine  local  competitors  for  the  purpose  of  exacting 
as  high  a  price  as  can  be  asked  with  foreign  competitors 
barred  out.  The  tariff  probably  does  assist  some  trusts 
which  desire  to  mainiaiji  high  prices  and  to  monopolize 
a  certain  product.  The  tariff  when  so  used  sliould  be 
abolished,  h  is,  however,  the  extort ioiiafe  ])rire  that  calls 
for  such  action,  not  the  mere  fact  of  industrial  combina- 
tion. AVhen  free  trade  is  proposed  as  a  general  panacea  for 
trust  evils,  to  l)e  aj)plied  to  products  which  can  not  be  pro- 
duced as  clicaply  in  this  country  as  in  foreign  countries, 
we  s4iould  not  hesitate  to  refuse  to  adopt  the  scheme.  Free 
trade  is  more  likely  to  produce  panic  than  to  be  a  panacea. 


CHAPTER  XIII. 
TRUSTS   AND    EXPANSIOX. 

It  is  a  fact  noted  hj  historians  of  political  events  that 
whenever  a  great  crisis  in  human  affairs  has  occurred,  there 
has  sprung  up  a  great  master  of  men.  Every  great  epochal 
movement  in  the  world's  history  has  brought  forth  its 
leader, — the  man  with  peculiar  qualifications  for  the  solu- 
tion of  the  new  problems  and  the  discharge  of  the  ne\T 
duties.  The  annals  of  America  are  replete  with  instances. 
In  the  trying  times  of  the  Revolution,  when  patience  and 
firmness  and  self-restraint  were  so  requisite,  there  was 
found  one  man  who  possessed  these  qualities  in  a  pre-emi- 
nent degree;  AVasliington  was  born  of  tlie  times,  God-given 
and  God-directed.  Later  when  the  country  went  through 
the  greater  strife  of  the  Rebellion,  when  the  perpetuity  of 
the  Union  was  at  stake,  the  needs  of  the  hour  found  in 
Lincoln  the  only  man  possessing  the  forbearance,  the  en- 
durance, tlie  charity,  and  the  utter  lack  of  malice  which 
alone  could  hold  together  the  N^orth  with  all  its  varving 
views.  Industrial  history  is  quite  as  full  of  instances  of 
a  Providential  care  for  the  wants  of  mankind  as  is  politi- 
cal history.  Whenever  human  needs  have  required  some 
new  product,  whenever  the  visible  supply  of  old  products 
has  become  completely  exhausted  or  so  diminished  as  to  be 
unable  lo  sup[)ly  the  demand,  oitlicr  new  quantities  of  tliose 
products  have  been  unexpectedly  discovered,  or  a  substi- 
tute has  been  found  in  abundance.     When  the  whaling 

260 


Trusts  and  Expansion  261 

industry  liad  passed  into  decline  and  tlio  supply  of  sperm 
oil  for  purposes  of  illumination  was  rapidly  becoming  ex- 
hausted, kerosene  in  almost  superabundance  was  discov- 
ered. When  our  country  was  being  denuded  of  its  forests, 
and  the  use  of  wooti  as  fuel  had  become  almost  impossible, 
great  beds  of  anthracite  coal  were  discovered.  When  tlu^ 
invention  of  the  steam  engine  revolutionized  the  industrial 
world  and  unfolded  vast  possibilities  in  the  manufacture 
of  all  the  commodities  that  nuikc  our  modern  civilized 
life  what  it  is,  there  at  once  arose  the  necessity  for  an 
enormous  su])])ly  of  soft  coal;  and,  forthwith,  beds  of  soft 
coal  of  vast  extent  were  discovered,  amply  sufficient  to 
supply  the  denumd.  When  electricity  began  to  be  a]i- 
plied  in  a  multitude  of  industries,  a  great  need  was  felt 
for  copper;  and  unknown  copper  mines  of  great  productiv- 
ity were  discovered.  We  attribute  these  provisions  for 
all  our  new  wants,  as  they  spring  up,  to  an  over-ruling 
I'rovidence,  to  destiny,  or  to  that  talent  of  invention  and 
discovery  which  is  the  child  of  necessity,  according  as  wc 
consider  the  matter  fi'om  a  religious,  a  historic,  or  a  scien- 
tific stand])oint.  '^Fhis  same  Providential  care  for  human 
needs  is  seen  not  alone  in  the  birth  of  leaders  for  great 
crises  and  in  the  sup])lying  of  products  necessitated  by 
iu>w  inventions  that  have  given  l)irth  to  increased  desires, 
but  also  in  the  broader  field  of  ])oliiical  develo])ment  and 
commercial  extension.  Connnercial  freedom  began  in  Eng- 
land in  the  fourteenth  and  llfteenth  centuries.  Prior  to 
that  time  the  sole  impiu'tant  industry  of  the  country  was 
agriculture,  limited  and  fett(U'e(l  l)y  the  feudal  system. 
In  the  latter  part  of  the  fifteenth  century,  when  commer- 
cial life,  fo-tered  by  the  new  commercial  freedom,  began 
to  manifr-st  itself,  a  new  world  was  discovered  furnishing 
a  field  for  tlie  exi'rcise  of  commercial  activity. 

The  mo-t   sirikimr  fact   in   the  financial  historv  of  the 


262  The  Trusts 

day  is  the  growing  surplus  of  capital.  One  of  the  great 
problems  which  confront  people  is  where  to  find  fields  for 
the  profitable  employment  of  saved-up  wealth.  For  at 
least  a  quarter  of  a  century  there  has  been  a  diminishing 
return  from  investments;  and  the  prices  of  first-class  securi- 
ties have  been  constantly  increasing.  The  matter  is  of 
moment  not  only  to  the  great  capitalist,  who,  perhaps, 
can  be  left  to  take  care  of  himself,  but  also  to  the  widow 
and  orphan  dependent  upon  the  savings  of  the  deceased 
husband  and  father;  and  it  is  of  equal  interest  to  the  wage- 
earner,  who  works  and  toils  in  youth  and  early  manhood  in 
the  hope  of  laying  up  something  for  the  inevitable  rainy 
day  and  for  the  time  of  old  age  and  decrepitude. 

The  most  striking  fact  in  the  industrial  history  of  the 
day, — a  fact  which  is,  indeed,  but  another  phase  of  the 
fact  of  a  surplus  of  capital  which  has  been  observed  in  the 
financial  world, — is  that  the  productive  powers  of  the 
civilized  nations  are  now  far  in  excess  of  their  own  powers 
of  consumption.  Xew  inventions  and  improved  methods 
in  industry  have  made  the  material  advance  of  the  last  one 
hundred  years  conspicuous  among  all  the  centuries.  At 
the  close  of  this  century  we  find  that  with  their  machines 
and  their  perfected  business  organizations,  the  industrial 
nations  of  the  world  possess  a  power  of  production  which 
is  much  greater  than  tlie  effective  demand.  It  is  only 
lately  that  this  has  become  true  of  the  United  States.  Un- 
til recently  we  have  been  a  borrowing  nation,  and  a  nation 
of  importers  of  manufactured  articles.  But  American  re- 
sources developed  by  American  enterprise,  managed  with 
American  thrift,  have  ])Iaced  us  in  a  position  where,  within 
a  year,  we  liave  loaned  .$^^r),U0O,()00  to  Kussia,  and  are 
ra]ii(!lyb(.'c:()iiiing  a  creditor  nation.  American  ingenuity  and 
inventive  talent  liave  ])rought  it  about  tliat,  notwitlistand- 
ing  that  we  are  the  greatest  of  agricultural  nations,  and 


Trusts  and  l^xpansion  26 


J 


notwitlistandin;;  that  wc  oat  and  drink  and  wear  and  con- 
siin:c  more  per  caj)ita  than  any  other  nation  of  the  world, 

and  n()t\vith>tandin,ir  that  our  home  market  of  eicfhtv  mil- 
lions of  purcliasers  is  the  riclicst  in  the  world,  and  notwith- 
standing- that  our  manufacturing  industries  are  even  now 
only  in  their  infancy,  these  industri(\s  are  capable  of  sup- 
plying the  demands  of  at  least  one  hundred  and  sixtv  mil- 
lions of  peo])le.  We  can  manufacture  twice  as  much  as  we 
can  consume,  or  to  ])ut  it  in  a  light  which  will  show  the 
danger  of  tlic  situation,  half  of  our  factories  and  mills  can 
supply  all  that  we  can  consume,  while  the  other  half  re- 
main idle;  half  of  those  employed  in  manttfacturing  can 
make  all  that  wc  need,  while  the  other  half  remain  unem- 
ployed. The  evil  consequences  of  over-production  have 
been  alternate  periods  of  feverish  activity  and.  stagnant 
de]iression:  first,  employment  over  time;  next,  a  shut- 
down. Business  has  been  irregular  and  spasmodic:  com- 
petition has  followed, — keen,  intense,  hitter,  destruciivo, 
and  finally  sclf-destrtictive.  There  is  but  one  alternative 
for  us:  either  lessened  production,  diminished  emnlovment 
and  lower  wages,  ruin,  and  bankruptcy,  or  else  new  markets 
and  larger  outlets  for  our  surplus  products. 

The  formation  of  trusts  is  one  of  the  means  adopted  to 
remedy  these  evils,  l^xpansion  of  territory.  extiMision  of 
commerce,  is  the  other  remedy, — a  remedy  supplemental 
and,  possibly,  alternative,  l-'.itlier  our  whole  industrial  svs- 
tem  is  likelv  to  be  revolutionized  at  once,  or  else  the  evil 
dny  must  be  put  o\]'  by  the  civilized  manufacturing  nations 
of  tlie  world  turning  their  snr])]us  capital  into  new  fields 
and  using  it  in  tlu^  development  of  the  decad(>nt  and  un- 
d(>velo]ied  countrii'-  of  the  (Orient  and  the  tropics.  The 
pndilem  of  over-production. — the  problem  of  trusts. — is 
momentous.  It  cannot  b(>  solved  in  an  instant.  "We  ne^d 
time  for  study,  for  ob.^ervation,  for  consideration,  and  for 


264  The  Trusts 

experimentation,  but  all  the  time  while  Ave  are  ptudvin<r, 
observin<z-,  cnns^idering,  and  experimenting,  relief, — tem- 
porary relief,  at  least, — from  the  evils  of  over-production 
may  be  had  Ijy  the  development  of  foreign  markets.  The 
evils  which  trusts  are  formed  to  correct  may  in  this  way  he 
ohviated;  at  any  rate  we  can  be  relieved  of  the  immediate 
stress. 

The  United  States  until  within  a  few  years  has  done 
nothing  to  exploit  foreign  countries.  It  has  developed 
the  amazing  resources  of  its  own  country.  Those  resources 
are  not  exhausted,  but  they  have  been  very  generallv  ap- 
propriated and  developed.  For  some  time  the  U.  S.  Com- 
missioner of  Public  Lands  has  been  reporting  that  the 
vacant  lands  of  the  government  consisted  principallv  of 
timbered  or  arid  lands,  and  that  there  was  little  public  land 
suitable  for  cultivation  without  clearing  or  irrigation. 

The  great  American  people  who,  ever  since  their  na- 
tional history  began,  have  been  steadily  and  constantly 
advancing  until  they  have  expanded  from  the  narrow  strip 
along  the  Atlantic  southward  to  Mexico,  and  westward  to 
the  Pacific,  and  northward  to  Alaska  and  the  Arctic,  have 
now  reached  the  point  where,  notwithstanding  the  lack 
of  the  complete  development  of  their  resources,  there  re- 
main few  resources  that  are  wholly  undeveloped.  Eco- 
nomic problems  in  America,  since  the  formation  of  the 
Pepublic,  have  largely  worked  out  their  own  solution.  Mil- 
lions of  immigrants  have  come  into  the  country,  but  tlio 
constant  pressure  upon  the  East  has  been  relieved  by  the 
steady  flow  of  emigration  to  tlie  unoccupied  and  fertile 
lands  of  the  West.  The  rapid  growth  of  the  country  has 
stiT-'iMliit'd  mamifneturi;"!::'-  ir.diistrv  in  the  East  and  Xorth 
until  Ave  have  become  one  of  the  greatest  industrial  na- 
tions of  the  Avorld.  But  the  cliecking  of  our  continental 
expansion  by  the  occupation  of  all  our  best  agricultural 


Trusts  and  Expansion  265 

land  is  sure  to  result  in  our  experiencing  new  and  o^reat 
economic  evils.  Unless  we  expand  in  other  directions, 
there  is  sure  to  be  a  diminution  of  the  demand  for  labor. 
Not  so  many  men  can  now  go  West  and  become  farmers 
and  ])ro(lucers;  more  of  thoni  must  remain  in  the  East  to 
glut  the  labor  market;  and  unless  new  markets  are  found 
for  our  surplus  products,  new  factories  can  not  bo  estab- 
lished,  and  many  of  the  existing  factories  must  suspend 
0|)eration. 

The  nations  of  Europe  have  for  two  generations  boon 
sending  to  America  their  surplus  labor;  but  tliey  have  done 
more  than  that  to  give  employment  and  to  bring  wealth  to 
tlKjse  who  have  remained.  They  have  realized  the  fact 
that  there  must  be  enforced  idleness  of  their  workers,  slmt- 
downs  of  their  factories  and  mills,  unless  they  found  new 
fields  of  activity.  They  have  appreciated  that  Ihoso  who 
work  are  those  wdio  create  and  who  acquire  wealtl!.  Tn- 
ecjuality  and  injustice  in  distribution  may  bring  it  about 
tluit  not  in  every  case  does  all  this  wealth  ])ass  to  tlie  in- 
dividual creating  it,  Init  of  nations  the  statement  is  true 
without  exce])ti<m.  '^['ho.  busiest  nation  is  the  we:iltbiest 
in  proportion  to  population;  but  if  a  nation  can  ])roduce 
any  one  article  in  larger  (quantity  than  it  can  consume,  it 
must  sto]")  the  jiroduction  of  it  or  sii])])ly  some  other  coTin- 
try  witli  it.  Th(>  I'luropean  countries,  es|)eciallv  in  the  last 
(piarter  of  a  century,  have  been  jnishing  forward  in  a 
race  with  eacli  other  to  acquire  colonies  or  spheres  of  in- 
fluence, with  whicli  they  could  estal)lish  relations  of  com- 
mercial intimacy.  Africa  has  been  carved  up.  Germanv, 
France,  and  Great  Britain,  each  has  its  slice.  The  last 
named  is  sure  to  annex  more  closely  the  Transvaal  and  the 
Orange  Freo  State.  France  is  pushing  her  sway  over  the 
Soudan.  She  already  lias  Algiei'sand  M;ida;:a;-(-ar.  (nrmany 
is  not  interfering  in  these  scheme.-,  luit  she  is  sure  to  de- 


266  The  Trusts 

niand  a  quid  pro  quo.  Italy  is  tn'ing  to  obtain  a  foot- 
liold  ill  Abyssinia.  In  Asia  and  Oceanica,  too,  the  Euro- 
pean powers  are  colonizing.  Great  Britain,  for  over  a  cen- 
tury, has  had  the  fertile  and  populous  peninsula  of  Ilin- 
doostan,  and  has  gradually  extended  her  conquests  and 
acquisitions.  A  large  part  of  China  has  been  mapped  out 
into  spheres  of  influence  by  Eussia,  Italy,  France,  and  Ger- 
many, and  though  the  Mongol  empire  retains  nominal 
sovereignty,  real  proprietorship  over  these  spheres  seems 
to  bo  in  the  several  European  nations.  Eussia  has  de- 
veloped her  vast  Siberian  territory,  has  acquired  an 
almost  dominant  influence  in  northern  China,  has 
virtually  appropriated  some  of  its  best  ports  and  a  large 
portion  of  its  territory.  Japan  has  taken  Formosa  and 
would  have  seized  much  of  China  or  Korea,  had  not  Eussia 
intervened.  England's  colonial  possessions  are  verv  many 
times  larger  than  the  mother  countrv'.  By  all  the  Euro- 
pean nations  an  attempt  has  been  made  to  find  new 
markets  and  new  fields  of  enterprise,  more  work  for  the 
toiler,  more  sales  for  the  merchant. 

One  of  the  recent  consular  reports  gives  some  idea  of  the 
extent  of  the  colonial  possessions  of  European  states.  It 
shows  that  Great  Britain,  outside  of  the  United  Kingdom 
itself,  possesses  16,662, 0?3  square  miles  of  territory,  hav- 
ing a  population  of  322,000,000;  France,  outside  of  the 
mother  country,  2,505,000  miles,  Avith  a  population  of 
nearly  50,000,000;  Germany,  1,615,500  miles,  with  a  popu- 
lation of  7,450,000;  Holland,  783,000  miles,  with  a  popu- 
lation of  34,210,000:  Portugal,  809,900  miles,  with  a 
population  of  10,200,000.  AVliat  these  nations  are  doing 
in  tlic  way  of  the  development  of  their  colonies  may  be 
inferred  from  their  railway  projects.  Eussia  is  building 
a  Trans-Si1)crian  railway  almost  five  thousand  miles  in 
length   and   Ijringing  the  Czar's  empire  into  close  touch 


Trusts  and  Expansion  267 

with  Japnn  and  China.  A  branch  of  the  South  Siberian 
raih'oad  has  been  extended  to  the  border  of  Afghanistan, 
opening  up  to  Kussia  the  riches  of  Persia  and  giving  her 
a  path  towards  India.  France  is  about  to  build  a  railway 
across  the  Sahara  Desert  from  Algiers  and  Tunis  to  Tim- 
buctoo  and  the  Soudan.  Cecil  Rhodes'  dream  of  a  railway 
from  Cairo  to  the  Cape  of  (lood  Hope  is  a  project  that  will 
hardly  be  long  deferred  after  the  termination  of  the  war 
with  the  South  African  republics. 

The  United  States  has  reached  a  position  where  it  is 
ol)liged  to  participate  in  the  struggle  for  foreign  m.arlvcts, 
and  to  find  new  channels  into  which  to  turn  its  surplus 
capital.  These  are  our  great  economic  needs  to-day.  Will 
Providence,  or  destiny,  or  human  ingenuity — whatever  you 
wish  to  call  it — show  us  the  way  in  tliis  time  of  need?  It 
would  seem,  indeed,  as  if  an  over-ruling  Providence  had, 
within  two  years,  pointed  out  to  us  the  way  of  supplying 
to  ourselves  the  means.  American  policy,  American  tradi- 
tion, and  American  interests  for  almost  a  century  and  a 
cjuarter  liave  kept  us  from  acquiring  territory  l)eyond  the 
continent;  hut  at  the  close  of  the  nineteenth  century, 
when  our  interests  demanded  a  wider  sphere  of  activity 
and  enlarged  markets,  although  tliis  tradition  and  old-time 
policy  hold  us  l)ack  and  the  timid  and  hesitating  endeavor 
to  restrain  tlie  movemeni  of  expansion  that  has  never 
stop])ed  since  tlie  time  when  ilie  tliirtoen  original  colonies 
formed  themselves  into  a  nation — at  this  time,  that  over- 
ruling Providence,  that  evolution,  tliat  destiny  which  is 
always  apparent  in  the  affairs  of  men.  manifests  itself,  and 
the  need  is  met.  Tlu^  blowing  up  of  the  liattleship  Elaine 
in  Havana  harbor,  and  the  prolongation  of  a  cruel  and 
merciless  war  of  extermination  against  a  weak  people  at 
the  very  threshold  of  our  country,  involved  us  in  a  contest 
with  Spain,  the  result  n\'  wliicli  was  tlial  without  premedi- 


268  The  Trusts 

tation  or  design,  unexpectedly,  if  not  reluctantly,  rich, 
fertile,  and  populous  islands  in  the  Orient  came  into  our 
possession  and  control.  The  paih  of  duty,  the  path  of 
destiny,  has  been  suddenly  opened  for  us  in  the  East.  For 
our  over-production  and  our  surplus  capital  we  have  sud- 
denly found  a  relief,  even  though,  perhaps,  temporary. 
We  want  constant  work  for  our  toilers,  not  half  time;  fair 
prices  for  our  products,  not  sacrifice  sales;  we  produce  more 
than  we  can  consume;  we  need  markets;  suddenly  oppor- 
tunities are  given  us  to  acquire  markets,  and  on  terms  as 
favorable  as  those  offered  to  any  nation  in  the  world.  True, 
we  could  always  sell  our  goods  wherever  men  were  willing 
to  buy,  but  trade,  to  a  great  extent,  follows  the  flag.  It  is 
largely  influenced  by  political  connections;  it  is  frequently 
barred  or  hindered  by  arbitrary  laws  enacted  in  defiance  of 
economic  laws. 

We  could  never  have  persuaded  ourselves  to  attempt  to 
take  possession  either  of  the  Philippines  or  of  Porto  Pico, 
had  they  not  come  into  our  power  as  the  result  of  a  war 
which  never  would  have  been  waged  had  not  humanity 
sounded  the  tocsin,  jjut  now.  when  those  islands  have 
come  into  our  power,  when  their  pacification  and  their 
government,  for  a  time  at  least,  fall  as  duties  upon  us, 
when  we  see  that  perforce  and  involuntarily  we  have  be- 
come implanted  in  them,  traditions  and  old-time  policies 
are  questioned  and  quizzed  in  the  light  of  the  facts  of  to- 
day. Just  what  we  shall  do  with  these  new  island  posses- 
sions, just  what  form  of  government  they  shall  have,  to 
what  extent  they  shall  have  complete  self-government  or 
j-iarticipate  in  federal  legislation  with  and  over  us,  are  ques- 
tions not  yet  settled.  But  the  American  people,  as  self- 
confidont.  as  self-reliant,  as  courageous,  and  as  tenacious  as 
cvfr,  demand  tho  retention  and  pacification  of  the  islands 
ihat  liave  Ijecome  theirs.     That,  at  least,  is  the  policy  of 


Trusts  and  Expansion  269 

the  Republican  ])arty.     He  who  would  give  them  up  would 

be  guilty  of  a  desertion  more  base  than  that  of  the  heart- 
less mother  wlio  leaves  her  eliild  on  some  one  else's  door- 
step. The  De'iuoerac-y  would  leave  the  Philippines  to  an- 
archy. The  Rf[)ublicans  would  pacify  them  and  develop 
their  resouri'i\s. 

The  Pliilippines  are  themselves  a  vent  for  the  industrial 
])ressure  that  trtists  are  designed  to  shut  off.  They  have 
ten  millions  of  inhabitants.  Although  their  wants  are 
now  of  the  simplest  kind,  lh(>y  will  increase  with  civiliza- 
tion. Their  tro])ical  fruits,  their  grasses,  their  other  pro- 
ducts, find  a  natural  market  here.  On  the  other  hand,  as 
they  advance  in  civilization  they  will  furnish  a  great 
market  for  our  manufactured  articles,  especially  cotton 
goods. 

We  of  file  rnited  States  need  the  Philippines  and  Porto 
liico,  ]i()t  only  as  markets  for  our  surplus  ])roducts,  but  as 
fields  for  the  em|)loymenf  of  our  saved-up  capital.  We 
need  the  former,  not  only  because  of  their  intrinsic  worth 
to  us,  but  because  they  are  the  key  by  which  we  can  unlock 
the  door  to  China's  markets. 

The  commercial  value  of  the  Philippines  to  America  has 
been  carefully  estimated  liy  Hon.  John  Barrett,  former 
Ignited  States  minister  to  Siam,  who,  during  his  leaves  of 
absenee  from  his  ])ost.  has  traveled  over  nearly  all  the 
countries  of  the  Orient,  and  has  made  a  careful  study  of 
commercial  conditions  and  i)ossibilities.  His  o]nnion  is 
that  of  one  of  exceptional  information,  and  the  greatest 
weight  and  (^(nisideration  should  be  given  to  the  following 
statement  in  an  articde  by  him  on  the  Philii)])in(^  situation, 
published  in  Tlie  Ri'vieir  nf  Rci-it'ir.-i  for  July,  1S99: 

'■  Jiulaiiiir  frniii  comparalixp  data  aftpr  lookinfr  lit  what  lia=-  }>een 
dniie  by  tho  Dutcli  in  -lava,  by  tlip  I'.rilish  in  P.iirmah  and  in  tlie 
Malay    Peninsula,    and    oven    by    the    French    in    Indo-China,    the 


270  The  Trusts 

United   States  should   develop   a  foreign   trade  in  the   Philippine 
Islands  within  the  next  fifteen  years  of  over  $100,000,000." 

That  the  benefits  of  the  development  of  trade  with  the 
Orient  will  be  in  no  sense  sectional;  that  they  will  not  only 
furnish  a  relief  to  our  manufacturers  who  stand  so  much 
in  need  of  new  markets,  but  that  they  will  benefit  the 
American  farmer  and  increase  the  market  price  of  his 
products,  is  also  the  testimony  of  ]\fr.  Barrett.  We  quote 
from  an  article,  in  Tlie  North  American  Beview  of  August, 
1899,  written  by  him: 

"  The  Far  East,  particularly  China,  affords  markets  which  should 
arouse  the  interest  of  all  sections  of  the  United  States,  and  make 
the  country  stand  unanimously  for  a  firm  foreign  policy.  The 
West  and  East  and  the  North  and  South  are  equally  concerned  in 
maintaining  the  freedom  of  trade  and  preserving  our  treaty  rights 
throughout  China.  Were  it  merely  a  sectional  issue,  there  might 
be  a  grave  question  as  to  tlie  advisability  of  taking  a  strong  posi- 
tion as  to  the  future  of  the  empire.  China  and  other  Asiatic 
countries  want  all  the  Hour  and  timber,  and  a  goodly  portion  of 
other  kinds  of  food  and  raw  prodticts,  which  California,  Oregon, 
Washington  and  neighboring  Western  States  can  stipply;  they 
want  the  manufactured  cotton  and  raw  cotton  of  the  South  in  in- 
creasing quantities,  and  the  time  may  come  when  this  Pacific- 
Asiatic  demand  will  take  up  the  surplus  supply  of  the  South's 
great  staple;  they  want  the  manufacttired  cotton,  iron,  steel  and 
miscellaneous  products  of  tlie  North  and  East,  together  with  un- 
limited quantities  of  petroletnn:  they  want  corresponding  manu- 
factured products  of  the  central  West,  and  there  is  no  reason  why 
there  should  not  be  developed  among  the  Asiatic  millions  a  demand 
for  the  central  West's  great  staple,  maize  (or  Indian  meal),  such  as 
has  been  created  for  flour.  I  draw  no  fancy  picture,  but  simply 
express  my  honest  opinion  after  five  years"  careful  study  of  the 
field  which  I  am  discussing. 

"  The  question  of  protecting  sticli  market  appeals  to  capitalist 
and  laboring  man  alike.  It  offers  tlie  former  an  opportunity  for  the 
investment  of  his  capital,  and  it  increases  the  emjiloyment  and 
wages  of  the  latter  by  ])roviding  a  greater  demand.  .  .  .  The 
farmers  of  tlie  West  and  South  can  unite  with  the  laboring  men 


Trusts  and  Expansion  271 

of  the  Xorth  and  East  in  supporting  the  shippers,  manufacturers 
and  exporters  in  developing  a  strong  Asiatic  policy.  Were  the  door 
of  China  closed  against  us  to-morrow,  it  would  mean  that  lahor  and 
capital  alike  would  suifer  immeasurable  harm.  Tliey  should,  there- 
fore, see  that  it  is  never  closed. 

"...  If  the  great  northern  provinces  of  China  now  require 
ST.OOO.OOO  worth  of  our  cottons,  there  is  no  valid  reason  why  they 
should  not  in  ten  years  from  now  consume  $2().()()(»,000  worth.  A 
few  years  ago,  !?3,(M)(),0()0  represented  the  value  of  the  trade.  When 
we  consider  that  the  cotton  mills  of  New  England  and  the  South 
are  supplying  this  demand  in  Manchuria,  and  that  they  have  even 
been  kept  running  when  other  mills  have  been  closed,  there  is  every 
reason  why  those  two  sections  should  join  together  in  insisting 
tiiat  tlu^  open  door  shall  ahsays  apply  to  ^Manchuria. 

"  American  exports  to  the  Far  East  to-day  approximate  $'40,- 
()00,(K)0,  if  the  actual  value  of  everything  which  leaves  our  shores 
is  counted;  but,  basing  our  estimates  on  reasonable  grounds,  there 
is  no  reason  why  they  should  not  ex])and  in  the  near  future  to 
$1.')().UO(».0()0,  and  our  total  exchange  reach  $.300,000,000.  Few  peo- 
jile  appreciate  the  enormous  business  that  is  now  done  up  and  down 
the  Pacific  Asiatic  coast,  it  amounts  to  $1,000,000,000,  gold,  per 
(inniiin,  and  re])resents  500,000,000  people.  Of  this,  the  imjiorts  are 
over  half.  Certainly  it  is  logical  to  hold  that  the  United  States 
should  be  able  to  supply  at  least  a  third  of  the  products  now  im- 
ported from  foreign  lands.  China's  trade  ainounts  to  .$250,000,000, 
with  a  po])ulation  of  o50,000.000  people.  If  her  wants  ever  expand 
in  any  such  degree  as  those  of  Japan  and  other  countries  which  have 
awakened  from  their  Asiatic  lethargy,  her  foreign  trade  should 
reach,  on  a  conservative  estimate.  $500,000,000.  Were  the  same 
ratio  of  population  to  trade,  or  one  to  two,  which  exists  in  all  other 
countries  of  Asia,  ])rogressive  and  retrogressive,  applied  to  China, 
her  future  foreign  exchange  could  he  estimated  at  $700,000.000. " 

Similar  testimony  is  that  given  hy  Mr.  James  S.  Fearon 
in  an  article  in  Thr  Fonnn  L'dr  .January,  1900: 

"  There  has  been  no  more  remarkalile  expansion  of  any  depart- 
ment of  our  commerce  than  has  t^^ken  ]>lace.  of  late  years,  in  our 

exports  of  cotton  cloth  to  China \i;d  yet,  it  is  jierfectly  true, 

as  the  members  of  the  Lyons  Comir.ercial  Commission  concluded 
aft^r  a  tour  througli  the  interior  of  the  counlrv.  that  '  foreign  trade 
luis  merely  scratched  the  surface  of  the  possibilities  of  China.     The 


-/  ^ 


The  Trusts 


great  majority  of  the  Chinese  are  familiar  neither  with  foreigners 
nor  foreign  j^roducts.'  " 

In  an  earlier  chapter  on  the  Trusts  and  the  Farmer,  we 
have  shown  the  estimates  of  J.  C.  Hanley,  of  the  National 
Farmers"  Alliance  of  America,  as  to  the  immense  value,  in 
dollars  and  cents,  of  the  demand  of  the  Orient  for  wheat 
and  cotton;  and  his  conclusion  that  this  demand  would 
increase  the  market  price  of  American  wheat  at  least  fif- 
teen or  twenty  cents  per  bushel. 

It  will  be  argued  by  the  opponents  of  expansion  that 
annexation  or  political  connection  is  in  no  sense  necessary 
to  the  ac([uirement  of  a  foreign  market.  It  will  be  said 
that  the  trade  follows  the  price  and  does  not  follow  tlie 
flag.  AVhetlier  or  not  this  is  true,  it  is  certain  that  the 
flag  is  necessary  to  protect  tlie  trade,  and  tlie  history  of 
colonization  shows  that  the  benefit  of  the  larger  market 
usually  falls  to  that  country  whose  ca])ital  is  employed  in 
the  development  of  the  market,  especially  if  it  is  that  coun- 
try which,  by  reason  of  the  exercise  of  political  control, 
maintains  the  order  and  government  which  alone  is  the 
guarantee  of  the  security  of  the  investment.  This  subject 
has  been  carefully  considered  by  Mr.  0.  P.  Austin,  chief  of 
the  United  States  Bureau  of  Statistics,  and  he  has  collated 
those  significant  facts.  In  the  year  189T,  Great  Britain 
supplied  forty-one  per  cent  of  the  products  imported  by 
her  colonies,  but  she  was  able  to  supply  only  fourteen  per 
cent  of  the  importations  of  countries  having  no  political 
connection  with  her.  Even  to  tlie  United  States,  a  coun- 
try with  wliich  she  has  direct  means  of  communica- 
tion, and  the  people  of  which  speak  the  same  lan- 
guage and  have  many  interests  in  cummon  with 
hor  t-iiixens,  she  supplied"  less  tlian  twenty-two 
j)er  cent.  Franco  supplied  licr  colonies  witli  sixty-two 
];>er  cent  of  tlieir  impcjrts,  ])ut  she  supplied  only  9.33  per 


Trusts  and  Expansion  273 

cent  of  the  imports  of  oilier  countries.  It  is  to  be  borne 
in  mind,  furthermore,  that  in  the  case  of  Great  Britain 
there  were,  at  the  time  mentioned,  no  discriminations  in 
the  tariir  hiws  of  her  colonies  in  favor  of  the  products  of 
the  mother  country  as  against  countries  that  were  the  com- 
petitors of  Great  Britain.  Great  Britain,  in  the  year  1897, 
found  in  her  colonies  a  market  for  nearly  $400,000,000 
worth  of  goods,  all  of  a  kind  for  which  the  i)roducers  and 
manufacturers  of  the  United  States  are  earnestly  seeking  a 
market.  Her  exports  to  her  colonies  were  forty  per  cent 
greater  in  the  year  1897  than  were  the  total  exports  of 
manufactured  products  to  the  entire  world  from  the  United 
States  in  that  year.  Great  Britain's  ex])orts  to  her  col- 
onies constitute  over  a  third  (34.4  per  cent)  of  her  entire 
exports.  But  commerce  has  another  side  than  exporta- 
tion. There  can  be  no  commerce  without  exchange;  no 
exports  unless  thcTC  are  some  imports.  In  1897  Great 
Britain  took  fifty-seven  per  cent  of  the  exports  from  her 
own  colonies,  whik'  fi'om  countries  not  a  part  of  the  Brit- 
ish world  she  took  but  twenty-one  per  cent  of  their  exports. 
Our  own  experience  in  the  case  of  the  Hawaiian  Islands 
amply  proves  how  political  connection  stimulates  trade. 
Tlie  following  article,  clipped  from  The  Auburn  (X.  Y.) 
Daily  Advertiser  of  Juno  !),  1900,  shows,  at  once,  the 
ip.crease  of  our  trade  with  these  islands  of  the  Pacific  lately 
nnnexctl  by  us;  also  the  meagreiiess  of  our  trade  with  coun- 
tiies  of  much  largei'  })o[)ulation  with  whom  we  have  no 
political  connect  inn: 

"Sen;)tor  I.odjrt'  callrd  attention  to  the  fact  that  the  trade  be- 
tween the  rnited  Stali'^  and  the  Tiauaiian  Islands  has  increased 
from  $1 1.500, OUO  in  isn:)  to  .>r:;'.:5,;!(iO.()(IO  in  181)!).  and  cites  it  as  an 
illusti'atinn  of  what  may  hai>p('n  with  I'orto  l\ico  and  the  I'liilip- 
pines.  'These  (-oUinies,'  he  -ays,  "will  ahs(irh  much  of  our  surplus 
manufactures  and  ajirfiiullnral  products,  fur  they  must  draw  their 
iloiu'  and  their  provision-  and  most  of  their  manufactured  merelian- 


2  74  The  Trusts 

dise  from  this  country.  Our  trade  last  year  with  the  Hawaiian  Isl- 
ands,' he  says,  '  was  greater  than  with  the  whole  of  the  Australasian 
colonies  with  their  5^000,000  of  people.  It  exceeds  by  more  than 
$3,000,000  our  trade  with  the  entire  continent  of  Africa;  it  is  150 
per  cent  greater  than  our  trade  with  all  the  Central  American 
states;  it  is  equal  to  30  per  cent  of  our  trade  with  the  whole  of 
Canada;  50  per  cent  greater  than  our  trade  with  all  the  British 
West  Indies;  half  as  large  as  our  trade  with  Brazil;  500  per  cent 
greater  than  our  trade  with  Venezuela,  and  conies  within  $(),000,000 
of  being  as  laVge  as  our  trade  with  the  entire  empire  of  China.'  " 

It  should  not  be  forgotten,  in  considering  this  matter  of 
imports  from  colonies,  especially  when  those  colonies 
are  tropical  or  Oriental,  that  the  development  of  their  re- 
sources is  largely  by  means  of  the  capital  of  the  home 
country,  and  the  prosperity  of  the  colonies  is  shared  in  by 
those  who  invest  their  money  in  them.  British  statisti- 
cians have  estimated  that  at  least  $2,000,000,000  of  English 
capital  have  been  invested  in  her  colonies.  If  so,  they 
have  furnished  an  outlet  for  the  use  of  the  surplus  capital 
of  the  United  Kingdom  and  the  profits  on  the  export  trade 
of  the  colonies  go  to  swell  the  wealth  of  the  citizens  of 
the  home  country  as  well  as  to  give  prosperity  to  the  in- 
habitants of  the  colonies  themselves.  The  limits  and  the 
purposes  of  this  article  do  not  permit  any  consideration 
of  the  great  benefits  to  the  colonies  themselves  by  the 
development  of  their  resources  by  means  of  the  capital  of 
the  colonizing  country.  We  have  been  considering  colon- 
ization and  expansion  only  in  so  far  as  they  affect  the  ques- 
tion of  trusts. 

Let  us  summarize.  Territorial  expansion  seems  to 
aid  in  the  acquirement  of  foreign  markets.  Foreign 
markets  are  absolutely  necessary  to  America  and  to  all  the 
industrial  nations  of  tlie  world.  Without  those  markets 
the  ])eople  of  these  countries  are  the  victims  of  over-pro- 
duction.     L'nlcss  tliey  ac(iuire  new  outlets  of  tra(U',  tliey 


Trusts  and  Expansion  275 

must  dimiui.-li  ))roduclioii,  le^^sen  the  eiii|jloymont  of  labor, 
lower  \va<i-es,  aiul  sillier  all  the  evils  and  hardships  and 
miseries  oi'  industrial  depression.  Trusts  have  been  formed 
for  the  purpose  of  correcting  these  evils.  Expansion  is  the 
onlv  alternative  or  su[)pleniental  remedy.  Expansion  may, 
however,  not  only  correct  the  evils  whicli  trusts  are  de- 
signed to  correct,  but  it  may  open  uj)  to  us  such  commer- 
cial possibilities  that  in  turn  the  trusts  will  have  to  he 
continued,  not  for  the  purpose  of  rcgidating  and  restrict- 
ing production,  but  as  the  most  perfect  organization  for 
the  seizure  of  the  great  opportunities  of  trade.  The  trust 
that  restricts  production  and  the  trust  that  reduces  the 
number  and  the  wages  of  the  employed  is  a  necessary  evil 
resulting  from  destructive  competition,  so  long  as  we  do 
not  find  markets  for  our  surplus  ])roducts  in  t!u>s('  coun- 
tries which  have  not  yet  attained  their  industrial  develop- 
ment. He,  then,  who  would  relieve  the  present  evils  of 
over-production  in  the  United  States  should  favor  tiiat 
policy  which  tends  most  surely  to  give  us  the  foreign  mar- 
ket, lie  who  wouhl  abolish  the  trust,  in  so  fai'  as  it 
attempts  to  restrict  production  and  to  lessen  the  oppor- 
tunities for  work,  he  who  would  abolish  the  trust  as  an 
evil  agency,  should  sustain  those  in  charge  of  the  affairs 
of  the  state  who  are  endeavoring  to  give  to  the  American 
worker  the  opportunity  to  supply  the  increasing  wants  of 
those  to  whom  American  civilization  may  be  borno. 

But  when  this  is  done  it  will  be  found  that  those  trusts 
which  are  only  gi'cat  industrial  organizations  of  enormous 
capital  and  ]iowor,  the  trusts  which  arc  the  cheapest  and 
most  efficient  means  of  jiroduction  and  distribution,  will  be 
necessary  to  tlu^  (l('velo])in('nt  of  tlu'^  trade  in  tlie  newly  ac- 
quired market.  Enormous  capital  is  essential,  and  only 
the  well-organized  trust  will  ]^ossess  the  nutans  and  the 
facilities.     We  have  alluded  in  earlier  chapters  to  the  great 


276  The  Trusts 

foreign  market  worked  up  by  the  Standard  Oil  Company, 
which  now  brings  $60,000,000  a  year  into  this  country;  and 
to  the  enormous  orders  for  rails  for  railways  in  Eussia  and 
China  which  have  been  recently  given  to  the  great  steel  con- 
cerns of  the  country;  also  to  the  fact  that  eighty  per  cent  of 
our  exports  of  manufactured  goods  are  said  to  be  products 
of  industrial  organizations  so  great  that  we  popularly  call 
them  trusts;  also  to  the  recognition  by  our  German  com- 
petitors of  the  fact  that  it  is  our  large  and  perfect  organiza- 
tions that  are  winning  for  us  industrial  supremacy.  The 
rapidity  of  our  strides  may  be  Judged  from  the  following 
article,  clipped  from  The  Rocliesier  (X.  Y.)  Democrat  and 
Clironide  of  June  ],  1900: 

OCR  ENORMOrS  KXPORT  TRADE. 

"  It  is  estimated  that  during  the  year  "\\  hich  will  end  June  30th, 
this  country  has  exported  of  tlie  products  of  its  factories  to  the 
value  of  about  $4.30,000,000.  Taking  this  record  in  connection  with 
our  agricultural  exports,  it  shows  an  extraordinary  degree  of  pros- 
perity, exceeding  that  ever  enjoyed  by  unj-  other  nation.  The 
total  foreign  commerce  of  the  United  States  for  the  current  year 
will  amount  to  over  .$2,300,000,000.  Of  that  it  is  estimated  that 
$1,400,000,000  will  represent  our  exports  to  other  countries.  That 
is  an  average  of  a  little  over  $3,835,010  a  day  for  tiie  entire  year. 
Uncle  Sam,  it  will  be  seen,  is  winding  up  the  century  with  the 
l)iggest  department  store  trade  on  earth." 

The  conclusion  of  the  whole  matter  is  this:  The  indus- 
trial salvation  of  the  country — the  only  escape  from  the 
evils  of  over-production  which  trusts  are  formed  to  cor- 
rect— the  welfare  and  prosperity  and  lience  the  happiness 
of  all  classes^ — is  the  acquirement  of  foreign  markets;  but 
in  the  development  of  those  markets  and  in  the  exploitation 
of  the  newly  acquired  fields  of  enterprise,  gigantic  indus- 
trial org-anizations  are  the  most  efficient  instruments. 


CHAPTER  XIV. 

THE    MAX    AND    THE    DOLLAR. 

William  ,T.  Bryan,  in  an  addro??  dcHvorcd  at  the  Chi- 
cago Trust  Conference  in  September,  1(S99,  declared  him- 
self as  favorin_<r  an  industrial  policy  which  placed  'Hhe 
man  before  the  dollar,'"  and  as  bitterly  opposed  to  any  sys- 
tem which  placed  "'■  the  dollar  l)efore  tlie  man." 

Mr.  I)ryan"s  s])eech  is  worthy  of  p-reat  consideration,  for 
it  calls  up  one  phase  of  the  problem  of  trusts  which  is  apt 
to  be  overlooked,  namely,  the  social  phase.  Just  wluit  thi.s 
elocjuent  orator  meant  by  his  epi.ijrammatic  expression — 
wliicli,  indeed,  lie  quoted  as  one  of  Lincoln's  utterances — :s 
not  perfectly  clear,  but  he  probably  meant  to  express  his 
belief  that  the  _o;reat  combinations  of  capital,  the  industrial 
trusts  of  to-day,  are  organizations  which  enable  a  few 
]i('(^[)]e  to  earn  or  to  acquire  vast  sums  of  money,  while 
working  the  ruin  of  the  masses.  Mr.  P)ryan,  for  the  pur- 
])oscs  of  argument,  wouhl  conc(Hlo  that  the  trust  is  a  means 
of  cheap  prochiction;  Init  he  contends  that  the  cheapness 
of  the  trust  and  its  savings  are  the  results  of  depressing  the 
])rice  of  raw  material,  of  discharging  vast  numbers  of  work- 
men, of  closing  hundreds  f)f  small  establishments,  of  dis- 
pensing with  thousands  of  middle-men.  and  of  saving  the 
losses  that  conu^  fr^un  a  liberal  extension  of  credit.  It  is 
these  hardsliijK  and  sufferings,  and  )iothing  but  these, 
which  Mr.  P>ryan  sees  in  trusts.  "Willi  the  strongest  desire 
to  do  hijn  perfect  justice  and  with  an  equal  yearning  to 

277 


2/8  The  Trusts 

throw  not  even  the  weight  of  one  single  individuars  influ- 
ence in  favor  of  any  policy  which  can  be  of  injury  to  the 
lowest  or  the  poorest  or  the  most  humble,  let  us,  howeveij 
present  a  few  thoughts  upon  the  subject  of  the  effect  of 
the  aggregation  of  wealth  upon  the  welfare  of  the  toilers 
and  wage-earners  and  those  who  are  popularly  called  the 
middle  classes  and  the  masses. 

It  may  sound  base  and  sordid  and  worldly  to  declare  that 
the  amount  of  a  nation's  wealth — the  abundance  of  those 
commodities  which  have  become  the  comforts  and  conveni- 
ences of  modern  life — is  a  fair  measure  of  its  progress; 
tliat  the  nation,  and  as  a  rule  the  individual,  that  is  very 
])oor,  that  is  obliged  to  work  incessantly  to  eke  out  an 
existence,  is  largely  prevented  from  attaining  the  highest 
standard  of  human  development.  This  statement  is  made 
Avith  a  full  recognition  of  the  vast  numbers  who,  though 
poor  in  this  world's  goods,  are  rich  in  all  the  elements  that 
constitute  a  true  and  nol)le  character;  and  in  full  view  of 
the  fact  that  great  wealth  is  often  corroding  and  debasing, 
and  that  it  Ijy  no  means  necessarily  brings  in  its  train, 
culture  or  education  or  refinement  or  character.  Still, 
wealth  is  one  of  the  hand-maids  of  civilization.'  It  is 
wealth  that  makes  leisure  possible;  and  it  is  leisure,  or  at 
least  that  form  of  leisure,  which  gives  us  opportunity  for 
study  and  travel  and  social  intercourse  and  recreation, 
that  fosters  refinement  and  culture.  The  man  who  has 
to  work  all  the  time  except  the  few  brief  hours  when  he 
sleeps  and  eats  merely  that  he  may  gain  strength  and  rest 
so  as  to  work  again,  leads  a  sordid  life.  The  highest  type 
of  man  can  never  be  evolved  from  one  so  oppressed  until 
his  earnings — his  wealth — have  given  him  more  leisure. 
Kdwin  Markbam's  ''  Man  With  the  Hoe"  is  the  poet's  pic- 
ture of  man  rlegradefl  to  tlio  level  of  the  brute  because  of 
the  lack  of  leisure  and  of  opportunity  to  elevate  himself 


The  Man  and  the  Dollar  279 

to  his  rightful  position  of  "man  created  in  the  image  of 
Hod,"  of  man  whose  place  is  but  a  little  lower  than  the 
angels. 

Wo  err  very  greatly,  then,  if  we  ignore  the  real  value  of 
weak  11  as  a  cultivating,  refining,  elevating,  and  uplifting 
force.  The  true  ])olicy  of  the  statesman,  who  would  assist 
the  mass  of  men,  is  to  enable  them  to  obtain  wealth.  Lin- 
cnln".<  aphorism,  which  Bryan  ([uotes  with  approval,  ''place 
the  man  before  the  dollar,"  is  not  correctly  inter])reted  if 
it  ins])ires  a  course  that  prevents  the  honest  ac({uirement 
of  wealth  or  creates  hostility  among  those  who  co-o[)erate 
in  its  production.  The  highest  statcsmanshi})  is  to  pro- 
cure the  adoption  of  such  policies  as  will  put  the  dollar  in 
the  hands  of  the  man  and  let  him  use  it  for  his  ad- 
vancement and  betterment.  Place  the  man  before  the 
dollar,  hut  {)ut  the  mait  within  rt'ach  of  the  dollar. 
I'lace  the  man  above  the  dollar,  but  in  the 
sen-e  that  the  man  may  stand  u})on  the  dollar  to 
rise  higlier  in  the  world.  The  real  question,  then, 
is,  "  Js  the  aggregation  of  wealtli  in  great  cor])()rations  a 
lifnelit  or  an  injury  to  the  mas'ses?  ""  We  have  shown  how 
]\Ir.  Bryan  sees  only  evil  in  trusts,  but  there  are  very  many 
men  of  great  ability  who  cannot  help  feeling  that  his  views 
are  short-sighted:  that  he  has  not  looked  either  hack  into 
the  ]iast,  or  far  into  the  future;  that  he  has  not  read  aright 
the  lessons  of  industrial  history;  that  he  has  not  clearly 
foreseen  all  the  jiossihlc  dangers  of  the  industrial  future. 

The  limits  of  this  hook  do  not  permii  as  thorough  a  con- 
sideration of  this  sul)ject  as  might  seem  desirahle,  hut  in 
the  chapters  that  have  preceded,  the  matter  has  of  neces- 
sity boon  incidentally  t'Uiched  uprm.  AVe  can  h  re  do  little 
more  than  to  sninmarize  some  of  \h,o  neints  already  made. 
The  significant  fact  of  industrial  history  is  that  combina- 
tion  of   capital   and   concentrati(Mi   of  elTort   have   always 


28o  The  Trusts 

meant  a  more  abundant  production  of  wealth.  Individu- 
alhm,  absolute  individualism,  is  the  lowest  type  of  sav- 
agery. We  can,  with  the  utmost  ditliculty,  conceive  of  a 
condition  in  which  each  person  wholly  supplies  his  own 
wants;  but  as  we  advance  to  what  may  be  called  industrial 
history,  we  observe  tbat  phenomenon  which  is  known  as 
the  division  of  labor;  that  system  of  industry  in  which  a 
man  no  longer  attempts  to  make  all  the  things  which  he 
needs,  or  even  all  of  any  one  thing  which  he  needs,  but  in 
which  special  talent  and  special  aptitude  manifest  them- 
selves and  train  themselves  in  the  inaking  of  a  part  of  some 
thing,  wliich  it  is  found  can  be  made  more  successfully  by 
that  person  than  by  others.  This  has  necessitated  exchange 
among  men  and  it  has  rendered  possible  the  application  of 
machinery,  which  in  turn  has  been  found  to  be  able  to  pro- 
duce certain  articles  or  parts  of  articles  in  even  greater 
abundance.  Just  in  so  far  as  the  division  of  labor  and 
specialization  proceed,  co-operation,  consolidation,  and 
combination  become  necessary.  The  result  is  that  wealth — 
the  things  that  men  need  to  eat  and  to  drink  and  to  wear 
and  to  consume,  all  become  very  al)undant.  Xot  only  does 
production  mightily  increase,  but  there  is  a  more  general 
distribution.  This  is  not  only  the  fact  of  history,  but  this 
is  the  necessary  result,  from  the  nature  of  things;  for  the 
increased  product  can  be  disposed  of  only  by  clioapening  it. 
The  cheapening  of  tlie  product  is  sure  to  increase  the  de- 
mand; the  demand  for  the  product  causes  a  demand  for 
la])or.  and  in  proportion  to  tlie  amount  of  work  to  be  done 
tlie  wages  of  the  workers  are  increased.  As  long  as  there 
is  competition,  and  tlie  probability  of  competition,  this 
must  1)0  the  result. 

"NFr.  I'rvan  declares  that  lie  sees  in  industrial  combina- 
tion, tlv  discliarge  of  the  worker.  To  otliors  it  >eerns  tbat 
unless  these  agencies  of  production  and  distribution,  which 


The  Man  and  the  Dollar  281 

save  all  iinnecc.<sary  wastes,  arc  adopted  by  Americans,  wc 
must  lose  tlie  markets  that  we  to-day  have,  and  the  mills 
and  factories  which  are  now  running  must  be  closed  and 
thousands  turned  out  of  employment  permanently. 

Mr.  Bryan  claims  to  sec  in  industrial  combination  a  de- 
pression of  the  price  of  the  raw  materials  raised  by  our 
fanners  and  planters.  Others  feel  that  the  danger  is  that 
nnless  those  who  buy  the  raw  products  and  manufacture 
them  into  finished  articles,  can  do  so  by  the  cheapest  pro- 
cesses and  under  the  cheapest  system  of  business  organ- 
ization, they  must  lose  their  markets  and  no  longer  have 
any  need  of  the  farmers"  raw  materials. 

]\Ir.  Bryan  says  he  sees  in  industrial  combinations  only 
the  ultimate  certainty  that  the  prices  of  manufactured 
articles  will  be  extortionately  raised.  Others  see  the  possi- 
bility of  lower  prices  because  of  chea})er  cost  of  production, 
and  they  also  observe  certain  forces  that  wdll  continually 
ti-nd  to  lower  those  })rices. 

Mr.  Bryan  ])rophesies  oppression  and  extortion  hy  in- 
dustrial combinations,  ill-gotten  fortunes  for  the  few,  and 
]K)verty  and  wretchedness  for  the  many.  I)y  others  the 
danger  that  is  apprehended,  is  that  extravaurant  meth- 
ods oi' prodnciiDn  and  distribut imi  will  reduce  .Vmerica  to 
\\\c  relative  industrial  position  of  those  nations  where  in- 
dustry is  disorganized  and  unregulat(Ml.  Where  is  there 
tl'c  greatest  national  prosperity?  ^^'her('  is  there  the  high- 
est standard  o'l  individual  living?  Is  it  in  Spain  a;id 
'I'urkev,  where  wealth  is  seldom  cond)ined  and  centralized, 
or  in  (lermany  and  the  I'niied  State-,  with  their  vast  busi- 
ness organizations? 

Is  thrre  any  doubt  in  the  mind  of  any  one  that  all 
classes — ca|)italists.  middle  classe-.  or  wage-earners,  what- 
ever viui  may  cdioosr  to  axW  them — enjoy  to-day  a  higher 
degree  of  prosperity  and  a  nolijcr  quality  of  civilization 


28 2  The  Trusts 

tlian  tliGv  have  in  previous  ages?  Have  not  the  comforts 
of  life  been  made  plentiful  and  cheap  by  reason  of  ths 
aggregation  of  capital?  In  centuries  gone  by,  people  had 
meat  but  once  a  week;  houses  were  without  chimneys  and 
without  windows;  books  were  so  rare  that  they  were  chained 
to  the  walls  of  chtirches;  plague  and  pestilence  worked 
havoc  with  the  poor;  the  laborer  was  little  better  than  a 
slave;  he  was  in  abject  wretchedness,  in  political  bondage, 
in  densest  ignorance;  he  was  not  a  freeman,  he  was  a  serf. 
The  very  rich,  even  royalty,  did  not  have  those  things 
whicli  to-day  are  considered  the  necessities  of  poor  people, 
and  which  every  one  possesses. 

The  men  of  the  world  who  have  done  the  most  to  ad- 
vance not  alone  its  material  prosperity  but  its  intellectu- 
ality, its  culture,  and  its  civilization,  have  been  its  inventors 
and  discoverers  and  explorers;  its  producers  and  distribut- 
ers— those  who  have  made  wealth  more  abundant,  for  the 
largest  production  means  the  widest  distribution  and  the 
fairest  distribution  means  the  fullest  production.  There 
have  been  other  emancipation  proclamations  than  Lin- 
coln's iminortal  paper.  They  have  l)ccn  promulgated  not 
by  statesmen,  but  by  those  who  have  found  or  fashioned 
tlie  new  tilings  +l"iat  have  transformed  industrial  methods. 
An  enlarged  liberty  for  mankind  was  heralded  when  Watt 
invented  the  steam  engine,  when  Stephenson  made  his 
locomotive,  wlu'U  Fulton  tirst  sailed  up  the  Hudson  with 
the  Clermont,  v.'hen  Hli  Wliitney  revolutionized  the  in- 
dustries and  elianged  the  destiny  of  the  South  by  the  in- 
vntion  of  tluj  cotton  gin,  wlien  Arkwright  brought  forth 
tlic  power-loom,  when  Bessemer  perfected  his  processes  of 
making  steel.  It  is  these  men  and  the  liundreds  of  thou- 
sands of  men  who  have  organized  and  managed  and  con- 
trolled the  industries  in  which  all  these  discoveries  and 


The  Man  and  the  Dollar  283 

inventions  have  been  utilized,  who  have  really  made  indus- 
trial freedom  possible. 

We  need  have  little  fear  of  that  capital  which  is  aggre- 
gated and  consolidated  for  productive  purposes.  The 
wealth  which  is  the  menace  to  the  country  is  that  which 
exists  in  the  form  of  unproductive  wealth.  As  long  as 
money  is  brought  together  for  productive  purposes  it  can 
do  no  harm  to  the  pul)lic.  If  a  hundred  thousand  dollars 
or  a  liundred  million  dollars  of  capital,  coupled  with  the 
toil  of  thousands  of  laborers,  produce  goods  of  any  kind, 
the  capitalists  who  produce  must  sell  these  goods  to  others 
before  they  can  obtain  any  enjoyment  or  benefit  from 
them.  If  as  a  result  of  the  sale  they  acquire  more  wealth 
and  again  invest  it  in  jiroductive  enterprises,  they  inevi- 
tably create  a  greater  demand  for  laljor,  and  it  follows 
necessarily  that  there  must  be  higher  wages  for  the  work- 
ers, since  wages  depend  not  upon  the  number  of  em})loyers, 
but  upon  the  amount  of  work  to  be  done.  It  follows  also 
that  tbere  must  be  lower  prices  in  proportion  to  the  in- 
creased abundance  of  the  articles  to  be  sold,  for  outside  of 
life's  most  absolute  necessities,  the  price  of  things  to  be 
sold  depends  not  so  much  upon  the  number  of  sellers  as 
upon  tbe  number  of  articles  to  be  sold. 

It  is  by  no  means  well  established  that  corporations  tend 
to  centralize  wealth;  that  is.  that  they  tend  to  liuild  up 
great  jirivate  fortunes.  The  contrary  would  in  all  proba- 
bility be  the  result  if  we  could  have  honest  corporate  man- 
agement— if  th(>  stockholder  with  one  share  felt  certain 
that  he  would  have  his  fair  ])n)  rata  of  tbe  earnings.  The 
man  with  a  hundred  dollars  to-day  places  them  in  the 
savings  bank  and  gets  three  or  four  ])cr  cent  interest;  but 
when  tlu'se  small  sums  have  been  agiiregated  into  one  great 
sum  in  the  savings  bank,  along  comes  the  railway  company 
and  sells  to  the  bank  its  bonds  (for  savings  banks  are  now 


284  The  Trusts 

allowed  in  many  states  to  invest  in  railway  bonds),  borrows 
the  money  at  tour  or  live  ])or  cent,  and  with  it  earns  a 
greater  sum.  \\c  repeat,  it  is  by  no  means  certain  that 
corporations  do  have  the  effect  of  centralizing  wealth.  The 
stock  books  of  many  of  our  great  railway  corporations  show 
that  the  average  holdings  are  becoming  smaller.  It  is 
almost  impossible  to  tell  whether  this  is  the  result  of  the 
investment  of  the  savings  of  persons  of  limited  means,  or 
whether  it  comes  from  a  more  general  distribution  by  large 
capitalists  of  their  holdings  in  stocks. 

There  is  one  fact,  however,  which  is  pregnant  with  sig- 
nificance. It  is  that  rates  of  interest  as  well  as  dividends 
are  decreasing,  while  wages  are  increasing  and  hours  of 
labor  are  shortening.  Furthermore,  the  prices  of  those 
products  which  are  made  by  business  enterprises  in  which 
concentration  of  wealth  is  possible,  are  decreasing.  It  is 
only  in  the  case  of  agricultural  products,  where  concen- 
tration is  impossible,  that  we  see  a  general  increase.  As 
the  capital  of  the  wealthy  increases,  it  brings  them  a  con- 
stantly decreasing  income.  Its  increment  is  invested  in 
enterprises  for  enlarged  production  of  articles,  the  prices 
of  which  are  constantly  lessening,  but  which  give  more 
and  more  employment,  and  therefore  tend  to  increase  tlic 
wages  of  the  toiler. 

Industrial  combination  docs  not  moan  industrial  slavery; 
it  means  industrial  freedom.  T]i(>  cui])loyecs  in  large  fac- 
tories invariably  are  less  subject  to  tlie  will  and  the  wish 
of  tlieir  employers  than  is  the  man  who  works  in  tlie  siore 
or  file  shop  where  he  has  but  few  co-workers.  Another 
truth  whicli  is  indisputa])]e  is  tliat  the  wage-earner  who  is 
most  free  from  the  dictation  of  his  emjiloyer,  is  tlic  man 
who  is  employed  by  the  person  whose  business  is  ]irosper- 
ous,  wliose  orders  for  goods  are  numerous,  whose  factory 
and  mill  are  running  to  their  full  capacity,  whose  profits 


The  Man  and  the  Dollar  285 

are  large;  while,  on  the  otlier  liand,  the  person  who  is 
produeing  at  no  profit,  who  has  no  orders  ahead,  who  has 
need  of  no  new  employees,  and  who  ean  hardly  find  woik 
for  those  then  in  his  enijiloy,  ean  afford  to  he,  and  fre- 
quently is,  an  absolute  despot. 

It  has  been  well  said:  "The  great  need  of  society  to- 
day is  not  individualism  in  the  production  of  wealth,  but 
individualism  in  citizenship."'  The  great  lesson  of  history 
is  that  if  men  would  accom])lish  the  greatest  results,  they 
must  work  together.  Socialism  and  individualism  are  not 
altogether  antagonistic;  they  are  complementary.  What 
the  working  people  want  to-day — what  they  need,  and 
what  they  wish,  and  what  they  are  clamoring  for — is  for 
more  time  for  social  and  intellectual  advancement,  and  less 
time  for  physical  toil.  They  ask  for  eight  hours  for  work 
and  eight  hours  for  rest  and  eight  hours  for  recreation  and 
education — and  tlie  request  is  a  proper  one.  When  it  is 
granted  the  chimes  of  history  may  well  ring  out,  for  they 
will  ring  in  a  new  era  in  civilization.  What  the  laboring 
man  wants  is  steady  em])loyment,  higher  wages,  and  a  fair 
])roportion  of  leisure.  He  is  much  more  apt  to  get  them 
when  his  em])loyer  has  cut  off  every  waste  in  his  methods 
of  ])roduction  and  distrilmtion.  The  freedom  and  liberty 
of  the  workingman  de]iend  not  on  the  fact  that  he  works 
for  wages,  1)ut  upon  the  amount  of  his  wages,  and  tliat 
depends  upon  the  amount  of  work  that  is  to  be  done.  The 
workingman  never  can  prosper  unhss  his  employer  pros- 
pers. The  more  prosperous  the  business  of  the  employer, 
sooner  or  latiT  tlu'  more  ]iros]ierou-;  will  be  the  employee. 

It  is  said  that  trusts  are  corrujiting  our  political  life. 
Th;it  is  liirii't'ly  due  io  tlu^  snecial  ])rivileges  that  we  hold 
out  before  tlicm.  Abolisli  tluun:  take  away  the  tempta- 
tion to  corruption,  and  corruption  will  cease.  It  is  said 
that  the  industrial  combinations  of  the  day  are  n  political 


286  The  Trusts 

menace  because  they  produce  inequality  of  wealth  and  that 
a  democratic  government  cannot  exist  if  there  is  not  a 
reasonable  equality  of  fortune  among  men;  but  we  believe 
we  have  shown  satisfactorily  that  the  aggregation  of  pro- 
ductive wealth  tends  to  lessen  the  inequalities  rather  than 
to  increase  them.  The  danger  arising  from  wealth  is  not 
in  the  aggregation  of  wealth  in  industrial  combinations,  in 
productive  enterprises, but  in  the  withdrawal  of  wealth  into 
channels  that  are  unproductive.  It  lies  in  the  extrava- 
gance of  the  rich,  in  the  vast  sums  that  are  put  into  arti- 
cles that  cannot  themselves  be  productive  of  new  wealth. 

In  conclusion,  we  repeat,  the  true  policy  is  to  adopt  that 
system  of  industry  which  will  place  the  man  iiot  only  hrfore 
the  dollar,  hut  within  reach  of  it.  The  wisest  statesmanship 
will  he  to  put  the  man  above  the  dollar  by  enahliny  hiin  to 
obtain  it  and  to  use  it  to  rise  superior  to  his  present  condition. 


CHAPTEE  XV. 

LEGISLATIVE    POWERS    OVER   TRUSTS. 

Befoee  we  can  with  any  advantage  consider  the  question 
of  what  Icgishilive  remedies  we  can  seek  for  the  evils  of 
trusts,  it  will  be  necessary  to  consider  the  scope  wliich, 
under  the  Constitution,  national  laws  upon  the  subject  can 
have,  and  also  the  limitations  upon  state  statutes.  It 
will  also  be  wise  to  give  some  consideration  to  the  results 
of  statutes  which  have  already  been  enacted.  The  anti- 
trust laws,  both  those  which  have  been  enacted  and  those 
which  have  been  proposed,  involve  grave  constitutional 
questions.  Inasmuch  as  these  laws  are  comparativelv  new 
and  inasmuch  as  few  of  them  have  been  passed  upon  by 
the  courts  of  last  resort,  many  of  these  (juestions  can  not 
be  said  to  ])e  authoritatively  answered;  still  tliei'c  are  pre- 
cedents which  foreshadow  the  final  decisions  of  tlie  courts 
whenever  cases  shall  come  before  them  in  wliicb  consti- 
tutional ])r()visions  shall  be  a]i[)lied  to  anti-trust  laws;  and 
there  have  ])een  a  few  decisions  l)y  the  Supreme  ('(Uirt  of 
the  Tnited  Slates  toucliing  these  laws  themselves. 

The  Federal  legislation  upon  the  subject  of  trusts  con- 
sists of  an  act  passed  in  LS9(),  which  is  known  by  the  name 
of  Senator  dolin  Sherman,  who  was  active^  in  st'curing  its 
passage.  We  give  that  act  com])lete  in  A})])eiulix  A. 
In  two  recent  cases,  ont^  known  as  the  Trans-Alissouri  case, 
and  the  other  as  the  Joint  Tratlic  case,  the  Sherman  act 
was  held  to  apply  to  railway  pools,  that   is,  to  combina- 

287 


288  The  Trusts 

tions  of  railway  companies  for  the  purpose  of  maintain- 
ing rates^ — even  when  the  rates  to  be  maintained  were  not 
unreasonable  in  amount.  But  the  matter  of  practical  in- 
terest now  is  its  applicability  to  industrial  combinations 
known  as  trusts,  for  the  suppression  of  which  it  was  de- 
signed. We  quote  from  a  recent  article  in  The  North 
American  Review  for  September,  1899,  entitled  "  Legal 
Aspects  of  Trusts,"  written  by  Mr.  Joseph  S.  Auerbach,  a 
well-known  corporation  lawyer  of  Xew  York  City.  The 
following  paragraphs  taken  from  his  article  and  embodying 
two  or  three  extracts  from  the  decision  of  the  T'nited 
States  Supreme  Court  in  the  Knight  case,  often  called  the 
Sugar  Trust  case,  and  decided  a  few  years  ago,  show  the 
limit  of  the  power  of  Congress  to  deal  with  industrial  com- 
binations, and  also  refer  to  the  limit  upon  the  powers  of 
states  to  deal  with  interstate  commerce.  From  them  it  will 
be  seen  that  Congress  has  no  constitutional  powder  to  stop 
industrial  combinations  that  are  engaged  in  manufacturing, 
even  though  they  are  monopolies.  It  can  only  prevent 
them  from  directly  restraining  interstate  commerce: 

"  Congress  has  such  po\ver  only  as  has  been  specially  conferred 
upon  it  by  the  Constitution,  and  the  authority  for  the  (Sherman) 
Act  is  found  in  tlie  provision  of  the  Constitution,  that  Congress 
shall  have  power  '  to  regulate  commerce  with  foreign  nations  and 
among  the  several  states  and  the  Indian  tribes.' 

"  This  provision  of  the  Constitution,  however,  confers  upon  Con- 
gress the  sole  authority  to  legislate  upon  questions  affecting  such 
commerce,  and  all  attempts  on  the  part  of  tlie  states  to  defeat  thia 
exclusive  right  vested  in  Congress,  whether  by  imposing  discrimi- 
nating taxes,  or  taxes  upon  goods  in  original  packages,  or  by  a  tax 
uj)on  the  agencies  employed  in  carrying  on  tliat  commerce,  have 
been  condemned  by  the  Supreme  Court  of  the  United  States. 

"  Any  attempt  also  on  the  part  of  the  states  to  bring  under  their 
control  or  regulation  any  article  the  suhject  of  trade  or  commerce, — 
except  where  Congress  lias  first  conferred  upon  the  state  that 
ri"ht    of    control    or    regulation, — has    been    likewise    condemned. 


LegislaLive  Powers  over  Trusts  289 

Even  where  such  riglit  of  eontrol  or  regulation  has  been  authorized 
by  Congress,  it  has  been  conlined  by  the  Supreme  Court  to  those 
eases  which  come  within  tlie  proper  exercise  of  the  police  power  of 
the  state. 

"  The  Act  of  Congress  quoted  above  (tlie  Sherman  Act)  has  been 
repeatedly  construed  by  the  Supreme  Court  of  the  United  States 
in  eases  which  have  excited  general  interest.  It  was  sought  to 
apply  the  Act  to  tlie  case  of  a  corporation  seeking,  as  alleged  by 
the  Government,  to  acquire  a  monopoly  of  the  manufacture  of 
sugar,  which  might  be,  and  which  in  all  probabilty  would  be,  the 
subject  of  trade  or  commerce;  and  the  corporation  conceded  that  it 
was  attempting  through  the  acts  complained  of  to  exercise  a  greater 
control  of  the  business  in  which  it  was  engaged.  The  Court  de- 
clined to  regard  the  Act  as  applicable  to  this  state  of  facts. 

"The  Court  said,  Chief  Justice  Fuller  writing  the  opinion: 

"  '  Tlie  fact  (lidt  (tn  article  is  manufactured  for  export  to  another 
state  does  uot  of  itxclf  make  it  an  article  of  interstate  eommerce, 
and  the  intent  of  the  manufacturer  does  not  determine  the  time 
when  the  article  or  product  passes  from  the  control  of  the  state  and 
belongs  to  Congress.' 

'■  And  the  Court  used  these  still  more  important  words: 

""Contracts,  combinations  or  conspiracies  to  control  domestic 
entcr])rise  in  manufacture,  agriculture,  mining,  production  in  all 
its  forms,  or  to  raise  or  lower  prices  or  wages  might  unquestionably 
tend  to  restrain  external  as  well  as  domestic  trade,  but  the  re- 
straint would  be  an  indirect  result,  however  inevitable  and  what- 
ever its  extent,  and  such  result  would  not  necessarily  determine 
the  object  of  the  contract,  combination  or  conspiracy. 

"  '  Nevertheless,  it  does  not  follo^r  tJiat  an  attempt  to  monopolize 
or  the  actual  motujpoly  of  the  manufacture,  was  an  attempt,  whether 
(.rcciitonj  or  consum)natcd.  to  monopolize  commerce,  even  though 
ill  order  to  dispose  of  the  product  the  instrumentality  of  commerce 
was  necessaril;./  inroked.' 

"  So  that  tlie  Supreme  Court,  as  stated  above,  has  limited  the 
objects  of  the  (Sherman)  Act  to  matters  clearly  and  unmistakably 
relating  to  interstat<'  commerce,  and  has  declined  to  permit  the 
states  to  interfere  with  any  jiroduet  or  article  the  subject  of  inter- 
state commerce,  <'xcei)t  where,  as  pointed  otit  above.  Congress  had 
authorized  tlie  state  to  exercise  over  such  article  or  product  its 
police  power  of  rcgukition  and  control  similar  to  that  exercised  as 
to  like  articles  produced  within  its  ov,  n  territory." 


290  The  Trusts 

It  would  seem  as  if  the  Sherman  law  was  a  complete  and 
full  exercise  of  the  right  of  Congress  to  legislate  upon  the 
subject  of  trusts,  and  as  if  nothing  further  could  be  done 
until  the  Constitution  of  the  United  States  was  amended 
so  as  to  give  Congress  further  power.  The  only  additional 
legislation  on  the  part  of  Congress,  under  the  present  con- 
stitutional provisions,  would  be  additional  penalties  and 
new  methods  of  procedure.  This  is  what  the  House  of 
Representatives,  during  the  session  now  drawing  to  a  close 
(June  5,  1900),  has  been  trying  to  bring  about.  A  bill  was 
introduced  by  one  of  the  Republican  Congi-essmen  and 
favorably  reported  by  the  Judiciary  Committee  of  the 
House  and  early  in  June  passed  by  the  House,  amending 
the  Sherman  law  in  certain  particulars.  Only  one  vote 
was  recorded  against  the  measure.  But  the  changes  which 
were  made  were,  as  has  been  said,  principally  matters 
of  procedure  and  increased  penalties.  They  covered  no 
new  causes.     [See  Appendix  B.] 

Let  us  now  consider  the  scope  of  state  laws  designed  to 
regulate  or  suppress  trusts.  In  the  first  place.  Congress 
has  exclusive  right  to  legislate  concerning  interstate  com- 
merce. None  of  the  states  have  any  right  to  interfere  with 
interstate  commerce  or  with  the  objects  of  interstate 
commerce,  unless  Congress  specifically  delegates  them  the 
power  to  do  so.  It  is  necessary  to  keep  thorougldy  in  mind 
this  limitation  upon  state  authority  because  it  practically 
prevents  any  efi^ectual  legislation  on  the  part  of  states  for 
the  suppression  and  control  of  trusts.  To  give  an  example 
of  this  limitation,  it  may  be  said  that  at  one  time 
the  legislature  of  the  State  of  Pennsylvania  passed  an 
act  proliihiiing  the  manufactur(>  and  sale  of  oleomargarine 
within  that  state,  and  tlie  Supreme  Court  of  the  United 
States  lield  tliat  that  law  was  not  in  violation  of  the  pro- 
visions of  the  United  States  Constitution  prohibiting  states 


Legislative  Powers  over  Trusts  291 

from  passing  any  law  that  would  deprive  one  of  life,  lib- 
erty, or  pro])erty.  But  when  it  was  attempted  to  ap{)ly  the 
same  act  to  shut  out  oleomargarine  which  was  sent  into 
Pennsylvania  from  another  state,  the  Court  said: 

"The  Powell  case"  (the  first  case  decided)  "did  not  and  could 
not  involve  the  rights  of  an  importer  under  the  coninierce  clause. 
The  right  of  a  state  to  enact  laws  in  relation  to  the  administration 
of  its  internal  ali'airs  is  one  thing,  and  the  right  of  a  state  to  pre- 
vent the  introduction  within  its  limits  of  an  article  of  commerce 
is  another  and  a  totally  ditlerent  thing.  Legislation  which  has  its 
effect  wholly  within  the  state  and  upon  products  manufactured 
and  sold  therein,  might  be  held  valid  as  not  in  violation  of  any 
provision  of  the  Federal  Constitution  when  at  Ihc  saiiic  time  leyis- 
lation  directed  toicard  prohihitiny  the  importation  within  the 
state  of  the  same  article  manufactured  outside  of  its  limits  might 
he  regarded  as  illegal,  because  in  violation  of  the  rights  of  citi::cns 
of  other  states  arising  under  the  commerce  clause  of  that  instru- 
ment." 

The  importance  of  this  is  that,  when  applied  to  trusts, 
it  practically  means  that  although  shut  out  from  obtaining 
a  domicile  or  establishing  themselves  in  a  state,  they  may, 
nevertheless,  ship  their  goods  into  it  if  they  can  ol)tain  a 
legal  domicile  in  any  other  state.  Corporations  are  crea- 
tures of  the  state  in  which  they  are  incorporated,  and  the 
state  which  incorporates  them  may  impose  upon  them  at 
the  time  of  their  creation  such  conditions  as  it  deems 
proper.  But  when  states  undertake  to  deal  with  corpora- 
tions chartered  by  other  states,  although  tliey  may  (h^iy 
them  the  right  to  ac(juire  a  domicile  witliin  their  territory 
or  to  settle  within  their  limits  to  do  business,  yet  it  seems 
they  have  no  more  power  to  interfere  with  interstate  com- 
merce and  to  ])rohil)it  a  trust  establislied  and  located  in  an- 
other state  from  shi])|)ing  goods  into  its  territory,  than  they 
have  to  interfere  witli  interstate  commerce  wlien  con- 
ducted by  ])rivate  persons.  ^Ir.  Auerhach's  statement  of 
the  law  on  this   subject   is   so   clear,  and   is  made  by  so 


292  The  Trusts 

eminent  an  authority,  that  we  quote  again  from  the  article 
by  him: 

"  It  has  been  held  in  a  series  of  cases  by  the  Supreme  Court  that 
each  state  shall  be  the  judge  of  the  conditions  under  which  for- 
eign corporations  shall  be  admitted  to  do  business  within  its  ter- 
ritory, and  that  discriminating  provisions  of  a  state  in  favor  of  its 
own  corporations  as  against  foreign  corporations  are  not  in  conflict 
with  the  clause  of  the  Constitution  of  the  United  States  which  de- 
clares that  '  the  citizens  of  each  state  shall  be  entitled  to  all  the 
privileges  and  immunities  of  citizens  in  the  several  states.' 

"It  has  been  held,  hotcevcr,  that  when  the  question  involved  is 
one  of  interstate  trade  or  commerce,  a  foreign  corporation  standi 
vpon  the  same  footing  as  an  individual. 

"  Every  state,  therefore,  has  a  liberty,  and  almost  a  license,  in 
determining  what  class  of  corporations  shall  be  admitted  to  its  ter- 
ritory, and  the  conditions  under  which  they  are  to  be  admitted, 
save  only  that  it  shall  do  nothing  wliich  in  eii'ect  regulates  trade  or 
commerce  carried  on  by  a  foreign  corporation.  It  can  determine 
that  a  foreign  corporation  shall  not  have  a  legal  status  there,  but 
it  has  no  right  to  restrict,  embarrass,  interfere  with,  or  have  any 
regulation  over  a  foreign  corporation  selling  its  goods  through 
solicitors  or  representatives,  or  otherwise  carrying  on  interstate 
trade  or  commerce  within  its  territory. 

"Exclusion  is  not  feasible;  it  is  a  mere  academic  right  on  the 
part  of  the  states,  for  the  exclusion  cannot  be  absolute,  since  the 
foreign  corporation  can  cross  the  border  of  the  state,  and,  as  a 
trading  corporation,  exercise  the  rights  of  an  individual  to  the  ex- 
tent of  disposing  of  its  product  by  solicitors,  or  canvassers,  and 
where  the  product  or  article  dealt  in  requires  skill  in  its  installa- 
tion, may  actually  instal  and  set  up  the  article  disposed  of.  .  .  . 

"  Corporations,  therefore,  domiciled  in  New  Jersey  and  trading 
elsewhere  have  nothing  to  fear  and  no  favors  to  ask  of  any  hostile 
state.  Such  state  may  say  that  they  shall  not  be  domiciled  there, 
that  they  shall  not  own  real  estate  there  except  on  its  own  terms. 
The  state  may  exclude  the  corporations  altogether  from  a  domicile, 
but  it  may  go  no  further.  These  corporations  may  come  and  go 
from  one  end  of  the  land  to  the  other  to  carrv  on  interstate  com- 
merce, and  no  state  barriers  or  regulations  shall  affect  them.  There 
are  no  state  lines  for  the  individual  or  corporation  carrying  on 
that  conmierce." 


Legislative  Powers  over  Trusts  293 

It  is  therefore  seen  that  however  wise  and  conservative 
the  laws  of  Xew  York  State  or  of  any  other  one  state  may 
he,  however  much  they  may  exact  pul)lieity,  however  much 
they  may  prevent  over-capitalization,  however  much  they 
may  provide  against  corporate  mismana<^ement,  and  how- 
ever much  they  may  require  that  corporations  shall  sub- 
mit to  ollicial  inspection,  yet  there  is  nothing  that  will 
prevent  corporations  organized  in  Xew  Jersey,  Delaware, 
Arizo7ia,  Illinois,  Plorida,  or  any  other  state  in  the  Union 
whose  laws  may  be  most  lax,  from  shipping  their  goods 
into  and  from  selling  them  in  Xew  York  or  in  any  state  of 
the  Union.  D()\d)tless  the  State  of  Xew  York  could  pre- 
vent these  foreign  corporations  from  acquiring  a  domicile, 
from  establishing  or  maintaining  factories  within  its  bor- 
ders, but  could  not  prevent  them  from  carrying  on  inter- 
state commerce  with  its  citizens.  It  could  not  tax 
their  agents;  it  could  not  shut  otit  their  goods;  it 
could  not  tax  their  goods  while  in  transit,  and  oven  if  it 
should  deny  to  a  foreign  corporation  the  right  to  sue  in  the 
state  courts  to  recover  the  price  of  the  goods,  the  foreign 
corporation  could  pursue  its  remedies  in  the  Federal 
courts. 

There  are  also  many  restrictions  ujwn  the  rights  of 
state  legislatures  to  pass  laws  relating  to  trusts  and  com- 
binaiious,  even  when  the  ])rovisions  of  the  laws  are  ex- 
presslv  limited  to  existing  corporations  cliartered  by  that 
particular  >tnt(\  or  when  limited  to  citizens  of  the  state 
itself.  Tiuvc  restriction?  are  imposed  by  the  fourteenth 
anu'udment  to  the  Tnited  States  Constitution,  which  de- 
clares that  no  state  sliall  dejn'ive  any  person  of  life,  lib- 
ertv,  or  ])ro])crty  without  due  process  of  law.  The  Supreme 
Court  has  declared  that  the  riglit  to  liberty  means  more 
than  fn>e(loni  from  iiU'arc(^rat ion.  ami  the  right  to  pro])erty 
UK'ans  more  than  not  havini:  it   destro\ed  or  demolished. 


294  The  Trusts 

It  means  tlie  right  to  use  and  enjoy  it;  to  make  contracts 
with  reference  to  it;  to  hold  it  or  to  sell  it  as  one 
pleases,  except  in  so  far  as  the  state  may  restrict  such  acts 
in  the  exercise  of  its  police  powers,  that  is,  in  the  exercise 
of  its  power  to  restrain  one  from  making  such  a  use  of  his 
own  property  as  works  an  injury  to  another,  or  violates 
the  rights  of  another.  It  has  been  strongly  argued  that  the 
right  of  contract  implies  not  only  the  right  to  compete,  but 
the  right  to  refrain  from  competing,  and  the  right  also  to 
agree  with  others  to  refrain  from  competing;  and  that  it 
is  only  when  competition  is  unreasonaMy  restrained  that  it 
can  be  forbidden.  It  must  be  admitted  that  there  are 
many  decisions  of  the  courts  of  the  State  of  Xew  York, 
both  before  and  since  the  passage  of  its  anti-trust  act  of 
1897,  which  seem  to  support  this  contention;  and  the 
decisions  of  the  Supreme  Court  of  the  United  States  seem 
to  hold  that  the  acts  which  are  forbidden  and  punished  as 
restraints  upon  interstate  commerce,  are  only  those  acts, 
contracts,  agreements,  or  combinations  whose  direct  and 
immcdinle  effect  is  to  restrain  interstate  commerce.  The 
same  court  has  also  used  language  in  its  decisions  which 
would  seem  to  lay  down  the  doctrine  that  contracts  of 
private  individuals  or  of  private  corporations  (not  quasi- 
pnblic  corporations  like  railroads,  gas  companies,  water 
companies,  etc.),  in  order  to  be  punishable  as  restraints 
upon  trade  must  be  vurennonahh  restraints.  These  dicta 
would  seem  to  have  committed  the  court  to  a  doctrine 
which  would  require  them  to  pronounce  any  state  law  that 
denied  (uto  the  right  to  make  a  contract,  which  only  rea- 
sonal)]i/  restrained  competition,  as  being  unconstitutional 
and  void.  On  the  oilier  liand,  the  decisions  of  llie  court 
have  lieen  siudi  that  it  can  hardly  fail  to  declare  all  such 
restraints  as  are  imposed  l)y  tlie  great  trusts  which  absorb 
all  or  nearly  all  the  ])roductive  agencies  in  any  one  in- 


Lcg-islativ^c  Powers  over  Trusts  295 

(liisirv,  as  beiiisx  imroasnnalilo  reptraiiits  and  as  creatine 
n'l 'duopolies. 

It  may  not  ho  amiss  to  mak(^  l)ri('f  mom  ion  of  the  num- 
bor  and  oharaotor  of  oxistin^i;  stato  anti-trust  laws.  ]\Ir. 
C"]i:;rlos  F.  lu^aoh.  Sr.,  in  his  troatiso  on  the  Lair  of  Mon- 
opiiJiex  and  Iiu/usfrial  Tni.^ls  puhlisiiod  in  l<Si)8,  shows 
tiiat  at  thai  timo  thirty-one  of  tho  states  liad  hnvs  pro- 
liihitin*;-  trusts,  ni()n()])oli(\<,  pools,  and  industrial  eornl)ina- 
tions.  We  fjivo  in  A])pendix  ('  certain  sections  of  tho 
Now  York  law.  Anti-trust  laws  of  the  various  states  dif- 
fer from  each  other  in  many  particulars;  and  yet  it  is 
generally  true  that  all  or  nearly  all  of  them  attempt  to 
]irohibit  in  express  terms  all  contracts  or  arrangements 
that  may  effect  anij  rc^lraint  of  trade  or  competition, 
^vhether  express  or  implied,  reasonable  or  unreasonable. 
In  1S!)4,  when  Ernst  Von  Halle  wrote  his  book  on  Trusts, 
to  which  reference  has  been  made,  there  were  anti-trust 
laws  in  abotit  twenty-two  states  and  one  territory,  besides 
the  one  enacted  by  the  Federal  government.  In  nearly 
every  one  of  the  states  it  was  declared  to  be  a  criminal 
conspiracv  for  two  or  more  persons  to  agree  to  regulate 
or  fix  the  ]irice  of  any  article,  or  to  fix  or  limit  the  quan- 
titv  of  anv  article  to  be  manufactured  or  produced  or  sold; 
or  to  make  a  contract  restraining  competition.  All  sucb 
combinations  are  declared  void:  and  those  who  formed 
tlioiii  were  punishable  with  heavy  fines  and  imprisonment. 
Not  infretpiently  all  such  combinations  were  denied  the 
riii'ht  to  sue  in  the  state  courts  to  recover  the  price  of  goods 
sold  bv  tliem.  Since  18!)4  the  statutes  have  been  made 
more  strin<:(mt.  The  Texas  law.  enacted  one  or  two  years 
airi\  is  perhajis  the  most  drastic  and  most  sweeping:  but 
the  law  of  nearly  every  state  forbids  nil  attem]its  by  agree- 
ment to  stop  competition,  to  regulate  production,  to  fi;x 
prices,  and  to  create  monopolies. 


296  The  Trusts 

The  limitations  of  the  power  of  the  Xational  Congress 
in  dealing  with  trusts,  and  the  restrictions  upon  the  power 
of  the  states  to  interfere  with  interstate  commerce, — the 
fact  that  the  Xational  government  can  not  forbid  com- 
binations of  manufacturers,  even  if  monopolies,  and  can 
regulate  only  interstate  commerce;  and  on  the  other  hand, 
the  fact  that  the  states,  although  they  can  forbid  unrea- 
sonable restraints  of  competition,  and  can  impose  condi- 
tions upon  the  corporations  chartered  by  themselves,  and 
can  also  impose  conditions  upon  foreign  corporations  that 
seek  to  locate  within  their  limits,  yet  cannot  prevent  for- 
eign corporations  from  sending  their  goods  within  their 
borders  and  selling  them  there, — these  things  show  clearly 
that,  if  we  are  to  have  efficient  legislation,  whether  that 
legislation  bo  regulative  or  destructive  of  trusts,  we  must 
have  an  amendment  to  the  United  States  Constitution.  It 
would  be  absolutely  paralyzing  to  business  as  well  as  de- 
structive of  political  harmony  between  the  states,  to  give 
to  the  states  any  authority  over  interstate  commerce.  The 
prosperity  of  the  country  has  been  due  to  the  absolute  free- 
dom of  trade  between  all  sections.  The  great  weakness  of 
the  original  confederation  which  was  formed  by  the  col- 
onies afterthelievolution, was  in  the  diversity  and  complete 
lack  of  harmony  between  the  laws  of  the  several  states  re- 
lating to  commerce,  in  the  arbitrary  and  unjust  restrictions 
and  impositions  placed  by  the  various  colonies  upon  trade 
with  each  other.  The  modern  facilities  for  transportation 
and  communication  have  welded  the  states  more  and  more 
firmly  together.  Our  lousiness  affairs  are  now  as  wide  as 
our  continent.  The  great  difficulty  so  far  in  dealing  with 
trusts  has  been  that  business  transactions  have  reached 
far  beyond  the  jurisdiction  of  any  court  that  had  control 
of  them.  It  has  become  a  necessity  for  the  Federal  Con- 
gress to  have  greater  power  over  business  given  to  it.    That 


Legislative  Powers  over  Trusts  297 

is  the  conviction  of  economists,  statesmen,  business  men, 
and  politicians.  Prof.  Henry  C.  Adams  and  Ernst  Von 
Ilalle  advocate  it:  even  Mr.  Jkyan  has  admitted  that  it 
may  become  necessary  to  do  this.  Scores  and  hundreds  of 
other  students  of  the  trust  problem,  Democrats  as  well 
as  Eepublicans,  have  admitted  the  necessity  of  a  consti- 
tutional amendment  giving  Congress  power  over  corpora- 
tions and  other  business  enterprises  which  are  so  great  that 
they  must  of  necessity  engage  in  interstate  commerce.  The 
Democratic  platform  of  189G  demanded  a  stricter  Federal 
supervision.  Yet  when  the  Eepublican  party  in  the  House 
of  Representatives,  in  ^May  and  June,  1900,  proposed 
an  amendment  which  would  have  enabled  Congress  effec- 
tively to  deal  with  trus-ts,  the  Democrats,  with  but  five 
exceptions,  voted  against  it;  and,  since  a  two-thirds  vote 
was  neces-ary,  killed  the  proposition.  If  people,  who  are 
trying  to  ^it  dov.-n  hard  on  trusts,  find,  in  coming  years, 
that  they  are  sitting  down  between  two  stools, — one,  in- 
adecpiate  Federal  legislation,  and  the  other,  insulhcient 
state  legrislation,— Xational  laws  that  cannot  touch  trusts 
and  state  laws  that  cannot  reach  them, — let  them  remember 
that  it  is  due  to  the  action  of  the  representatives  of  that 
party  which  is  so  strongly  wedded  to  the  doctrine  of  state 
rights,  that  it  will  sacrifice  the  only  means  of  obtaining 
practical  remedies  for  oppressive  evils,  in  order  to  be  consis- 
tcnt  in  its  adherence  to  a  theory  of  government  which  the 
course  of  events,  the  pro;:ress  of  the  world,  and  all  the 
achievements  of  invention  and  discovery,  by  unifying  the 
states  into  one  indissoluble  union,  are  continually  and  in- 
exorably demanding  shall  be  modified  so  as  to  accord  with 
existing  conditions. 

There  are  some  significant  facts  to  be  observed  in  con- 
nection with  the  anti-trust  legislation  oi  t!ie  I'^nited  States. 
Since  that  legislation, — since  1887,  for  example, — there  has 


298  The  Trusts 

been  a  vast  increase  in  the  nmnLer  of  trusts.  The  old 
form  of  organization,  the  tiaist  proper,  has  been  given  up; 
but  innumerable  gigantic  corporations  have  sprung  up. 
The  power  is  more  centralized  than  ever,  competition  is 
more  effectually  restrained;  and  yet  the  form  of  organiza- 
tion is  such  that  it  is  somewhat  inaccurate  to  speak  of  it 
as  a  combination,  and  very  difficult  to  cause  its  abolition  as 
a  combination.  It  is  difficult  to  frame  laws  forbidding 
it  to  purcliase  property,  which  will  not  forbid  purchases 
of  property  by  others.  Along  with  the  corporations  have 
come  many  corporation  evils,  such  as  over-capitaliza- 
tion, corporation  mismanagement,  stock  gambling,  and 
kindred  evils.  It  is  by  no  means  certain  that  our  "  latter 
end  is  not  worse  than  our  first."  The  only  gain, — per- 
haps a  gain  that  will  more  than  offset  all  the  evils, — has 
been  that,  in  compelling  combinations  to  incorporate,  we 
have  compelled  them  to  assume  a  form  of  organization 
which,  because  it  is  artificial  and  because  it  is  the  creation 
of  the  state,  is  peculiarly  subject  to  limitation  and  regula- 
tion by  the  state.  Our  laws  have  not  succeeded  very  well 
in  killing  trusts.  They  have  only  brought  about  a  form  of 
organization  which  renders  trusts  easier  to  control  than 
when  they  consisted  of  private  individuals  bound  together 
by  private  agreements. 


CHArTEE   XVI. 

THE    REMEDY    FOR    THE    EVILS. 

"We  come  now  to  tliat  rnomcntou?  question,  wliich  re- 
main>  unanswered  after  over  a  decade  of  consideration. 
The  question  of  the  honr,  tlie  question,  indeed,  of  the  era, 
is:  ''  What  is  the  remedy  for  tlie  evils  of  trusts?  Sliall 
we  abolish  trusts  entirely?  Shall  we  kill  the  trusts?"'  The 
popular  answer  has  always  been,  '•  Yes."'  The  Xational 
Conp-ress  hy  passin,!,'-  the  Sherman  act  has  said,  ''  Destroy 
the  trusts."  The  lef::islatures  of  thirty-one  states  hv  en- 
actments that  are  drastic  and  sweepinc:,  declare  that  trusts 
must  he  stamped  out.  Every  member  of  the  House  of 
Representatives,  with  one  exception  only,  hy  voting  in  favor 
of  the  amendments  to  the  Sherman  act,  making  its  pen- 
alties more  severe  and  prescribing  a  course  of  procedure 
more  certain  to  give  effect  to  the  law,  has  said  that  trusts^ 
must  go.  The  platforms  of  all  the  political  parties. — Ee- 
publican.  Democratic,  Xational-Democratic.  Social-Demo- 
crntic.  Topulistic,  and  Prohibitinriist. — ditTer  only  in  the 
viizor  of  their  exj'tressinns  of  denunciation  of  trusts.  Like 
Cato's  letters  which  were  never  closed  without  the  declara- 
tion, "  C;irthai:(>  must  be  destroyed.'"  no  political  document, 
whether  it  be  a  message  of  an  executive,  a  speech  of  a 
legislative  candidate,  or  the  platform  of  a  party  organiza- 
tion, is  complete  with.out  its  threat  of  extinction  of  trusts. 
The  subj(H-t.  indeed,  is  worthy  of  prof(nind  consideration. 
Before  we  attempt  to  sug,<:est  remedies,  or  to  sum  up 

299 


300  The  Trusts 

the  remedies  already  suggested,  let  us  make  a  resume  of 
our  study  of  trusts,  and  at  the  risk  of  being  very  peculiar 
and  exceptional,  let  us  consider  what  are  the  evils  of  trusts. 
First,  then,  we  have  seen  that  we  are  living  in  a  day  of  great 
things.  Business  opportunities  are  gigantic,  industrial  un- 
dertakings are  enormous,  commercial  projects  are  vast, 
and  great  husiness  organizations  have  hecomc  a  necessity; 
since  the  dawn  of  industry,  there  has  been  a  constant  ten- 
dency for  them  to  increase  in  size.  Xext,  the  present  sys- 
tem of  business  is  characterized  by  excessive  competition: 
there  seems  to  lie  a  tendency  to  carry  the  struggle  of  com- 
petition to  such  an  extent  that  it  hecomes  injurious  to  the 
consumers  as  well  as  ruinous  to  the  competitors  themselves. 
Modern  competition  is  destructive  and  self-destructive;  it 
has  a  tendency  to  end  in  monopoly  itself.  Modern  com- 
petition is  often  unreasonable,  and,  if  it  were  not  for  the 
possibility  of  unreasonable  restraints,  agreements  for  its 
discontinuance  would  commend  themselves  to  the  public 
as  being  highly  proper.  Consolidation  and  combination 
render  possible  cheaper  production  and  infinitely  cheaper  dis- 
tribution; the  competitive  system  is  so  expensive  in  its 
operation  that  the  price  we  pay  for  many  articles  is  far  in 
excess  of  the  cost  of  actual  production  plus  what  would 
be  a  fair  profit,  if  the  best  and  most  perfect  methods  of 
organization  were  adopted.  There  are  gigantic  evils  re- 
sulting from  the  lack  of  regulation  of  industry;  consoli- 
dation makes  possible  a  better  control, and  will  enable  those 
adopting  this  form  of  organization  to  sell  goods  at  lower 
prices. 

It  is  only  by  avoiding  all  the  wastes  of  excessive  com- 
petition, by  availing  ourselves  of  all  the  savings  of  com- 
bination and  consolidation,  by  seizing  all  the  economic  ad- 
vantai''''?  of  jxrcat  industrial  organizations,  in  addition  to 
adopting  the  latrst  and  most  improved  machine?  and  proc- 


The  Remedy  for  the  Evils  301 

esses,  that  we  can  lessen  the  cost  of  production  and  lower 
the  prices  of  our  ^<>ods,  without  cutting  down  wages  and 
witliout  depressing  the  prices  paid  for  raw  materials.  We 
must  lower  our  prices  in  some  way  to  meet  tlie  prices  made 
by  the  intense  competition  of  tlie  day,  or  lose  our  trade 
and  call  down  upon  ourselves  industrial  ruin.  Perfection 
of  business  (jrganization,  supplementing  perfection  of  me- 
chanical equipment,  is  the  only  way  in  which  we  can  win 
in  the  international  struggle  for  industrial  supremacy, — 
the  only  way  in  which  we  can  obtain  foreign  markets  for 
our  })roducts  which,  in  nearly  every  industry,  are  in  ex- 
cess of  home  consumption, — the  only  way  in  which  we 
can  keep  our  wage-earners  constantly  employed  at  remun- 
erative wages,  or  increase  or  even  continue  the  present  de- 
mand for  raw  materials, — the  only  way  in  which  we  can 
constantly  cheapen  the  cost  of  our  goods  and  advan- 
tageously lower  prices.  To  prevent  or  restrain  all  com- 
binations and  conscdidatious  and  concentrations  of  capital 
and  skill,  would  be  the  greatest  business  folly  in  the  world's 
history, — an  act  sure  to  result  in  bankruptcy,  misery,  and 
wretchedness. 

AVorso  than  competition,  however,  is  monopoly, — the 
])aralysis  of  business,  the  obstacle  to  all  progress,  the  bane 
of  liberty.  Monopoly,  whether  it  be  the  result  of  exclusive 
])rivilegcs  and  legal  rights  granted  by  the  sovereign  or  sim- 
ply that  (legToe  of  control  over  an  industry  which  enables 
one  ])ei'sn7i  or  group  of  persons,  at  will,  to  fix  ])rices,  to 
det(M'mine  jiroduelion,  to  establish  wages  or  to  de])ress  the 
])riees  of  raw  mat(>rials  in  any  field  of  industry,  is  evil  and 
oidy  evil.  Whatever  may  be  the  benefits  of  trusts  or  in- 
dustrial combinations,  if,  for  any  length  of  time,  those  who 
f(M'm  tlii'm  are  able  to  keej)  |>rices  unduly  high,  injury  to 
all  classes  and  conditions  will  result,  and  only  injury. 

When  there  arc  no  legal  restrictions  and  no  special  priv- 


302  The  Trusts 

ilcges^  trusts  are  not  legal  monopolies.  Neither  can  they 
permanently  be  practical  monopolies.  Competition  is  sure 
to  spring  up,  if  undue  prices  are  charged.  The  constant 
increase  in  the  wealth  of  the  world  causes  capital  always 
to  look  out  continuously  for  opportunities  for  investment; 
just  as  water  seeks  its  lowest  level,  so  capital  is  sure  to 
invest  in  the  business  that  gives  promise  of  the  greatest 
profit.  The  fear  of  competition, — potential  competition, — • 
is  a  powerful  restraint  upon  the  temptation  to  cliarge  high 
prices.  But  trusts  for  temporary  'periods  have  the  power 
of  heing  really  and  actually  oppressive,  exacting,  and  vierci- 
less  manopolies.  Such  they  may  be  and  very  frequently  are, 
pending  the  establishment  of  new  competition.  Further- 
more, the  trusts,  by  using  competition  as  a  weapon  and  by 
practicing  cut-throat  competition  and  by  selling  at  times 
or  in  special  localities  at  jjrices  far  below  cost,  are  able  to 
crush  out  new  competition;  and  the  knowledge  of  the 
custom  of  trusts  to  use  these  unscrupulous  means  is  always 
a  deterrent  to  the  establishment  of  competition.  It  crushes 
out  active  competition,  and  greatly  weakens  the  force  of 
potential  competition.  Competition  is,  moreover,  gener- 
ally an  uneconomic  remedy  for  trust  evils.  In  reality,  the 
establishment  of  a  new  enterprise  for  the  purpose  of  lower- 
ing prices  is  a  waste  of  national  wealth,  whenever  the  ex- 
isting productive^  agencies  have  a  capacity  equal  to  or  in 
exce.-s  of  the  existing  demand;  and  in  nearly  all  our  in- 
diisirics,  there  is  to-day  such  a  condition.  While  this  con- 
dition deters  coinj)etition,  (!ven  although  the  various  enter- 
])iiscs  of  the  industry  are  individually  controlled  and  man- 
aged, and  while,  perha])s,  competition  is  no  more  deterred 
whon  all  these  })roductive  industries  (with  a  capacity  in 
excess  of  the  demand)  are  aggregated  into  one  organization; 
yet  whether  the  restraint  is  greater  or  less,  in  case  of  ag- 
gregation or  lack  of  aggreiration,  competition  is  always  an 


The  Remedy  for  tlie  Evils  303 

uneconMiuic  rciucd}',  when  tlie  capacity  of  existing  agencies 
exceeils  ihe  (leiiKUuI;  and  therefore  potential  competition 
is  not  a  wholly  wise  remedy  for  the  evils  of  trusts.  It  is 
true  thai  the  enterju'ise  and  hopefulness  of  business  men 
are  such  that  even  uiider  the  conditions  of  industry  just 
mentioned,  competition  in  time,'  will  spring  up  if  prices  are 
high  and  if  then'  is  the  ])0ssibility  of  ac(iuiring  profit.  But 
this  generally  being  wasteful  it  is  the  j^art  of  wisdom  not 
to  rely  on  it  wholly  as  a  remedy  for  high  prices,  but  to  pre- 
vent eondjinatiuns,  if  possible  from  acquiring  so  great  a 
control  of  any  industry  as  to  be  practical  monopolies.  An 
enlightened  self-interesl  would  keep  trust  owners  from 
chargiiig  extortioJiate  prices  and  thereby  inviting  their 
(jwn  ultimate  destruction  by  cremating  competition.  But 
grei'd  and  scllishness  are  ajjt  to  blind  (jne  to  true  self-inter- 
est; and  trust  owners  are  constantly  tenqned  to  raise  ])rice5 
unduly.  Every  economic  advantage  of  the  trust  to  tlie 
])roducer  as  well  as  to  the  consumer  is  lost  if  (and  so  long 
as)  such  a  policy  is  ])ursued.  Cheap  production  is  of  no 
advantage,  but  may  be  of  positive  harm,  if  prices  are  not 
lowered.  Even  though  the  evils  of  trusts  are  only  tempo- 
rary, as  is  true,  tliey  are  grievous.  The  underlying  evil  is  the 
occasional  imposition  of  an  extortionate  price;  the  cause 
of  th(>  evil  is  the  ])ossession  by  the  trust  of  all  or  nearly  all 
the  ])roductive  agencies  in  an  industry  in  wliich  for  a  time 
conip(>tition  is  rendered  inactivt'  because  new  establish- 
nuiiis  in  that  industry  are  not  nt'cded  for  productive  pur- 
])oses.  In  the  train  of  an  extortionate  price  there  follow 
thr-e  evil.-:  lessciu'd  consumption,  diminished  production, 
lack  of  cmnloynient.  lower  wages,  depressed  prices  for  raw 
materials,  stagnation,  and  general  bankrujitcy. 

Some  of  the  trusts  are  nndonbtedly  formed  for  the  pur- 
pose of  securiuLT  t!ie  economic  advantages  of  combination, 
but  a  vorv  larcre  number  of  them  are  brought  into  being 


304  The  Trusts 

and  are  sustained  by  means  of  special  privileges,  sucli  as 
public  franchises,  railroad  discrimination,  unequal  taxation, 
and  other  forms  of  partiality,  which  enable  the  favored 
parties  to  crush  out  the  competitors  who  are  not  thus  fav- 
ored. Careful  students  of  the  trust  prohkm  believe  that  a 
vast  majority  of  the  trusts  of  to-day  owe  their  existence  as 
well  as  strength,  not  to  their  economic  superiority,  but  to 
their  possession  of  special  privileges.  These  privileges,  even 
if  not  the  cause  of  tlie  trusts,  are  certainly  the  cause  of  a 
very  large  portion  of  trust  evils,  for  in  proportion  as  special 
privileges  are  accorded,  the  favored  organizations  are  re- 
lieved from  the  necessity  of  giving  to  the  community  better 
service  and  lower  prices.  Furthermore,  it  is  beyond  ques- 
tion that  while  the  desire  of  adopting  the  most  economical 
methods  of  organization  is  the  motive  that  actuates  a  num- 
ber of  the  persons  entering  into  trusts,  yet  nearly  all  the 
trusts  which  have  been  formed  within  the  last  three  years 
liave  been  the  inflations  of  the  "  promoter  "  rather  than  the 
combinations  of  the  real  producers.  Their  purpose  lias 
largely  been  to  sell  to  the  investing  public  the  over-capital- 
ized stock  of  these  corporations;  and  the  result  of  the  over- 
capitalization has  been  a  tendency  to  impose  high  prices 
for  the  purpose  of  accumulating,  even  though  temporarily, 
dividends  which  would  give  an  apparent  value  to  the  stock 
in  excess  of  its  real  value;  another  result  has  been  to 
stimulate  stock  gambling,  corporate  mismanagement,  and 
improper  manipulation  of  the  securities  of  the  company 
not  only  by  speculators,  but  also  by  the  officers  of  the  com- 
panies themselves.  This  has  resulted  in  those  in  charge 
of  great  trusts  not  infrequently  giving  their  time  and 
energy  to  manipulation  rather  tlian  to  management.  Tt 
has  largely  impaired  pulilic  oonfulenee.  Tt  has  filled  the 
financial  condition  of  the  country  ^vith  much  uncertainty. 
It  has  so  destroyed  confidence  that  panics  have  resulted. 


The  Remedy  for  the  Evils  305 

It  is  thus  seen  that  \vc  have  certain  evils  apparently  in- 
herent in  trusts,  but  that  they  are  temporary.  We  also 
have  numerous  incidental  evils.  The  great  remedy  may 
be  said  to  be  competition.  This  is  true  notwithstanding 
trusts  are  formed  in  order  to  limit  competition;  and  not- 
withstanding there  are  limitations  to  competition  as  a  rem- 
edy tor  trust  evils.    But  what  are  the  speeitic  remedies? 

Abolish  all  special  privileges;  prohibit  and  absolutely 
prevent  railroad  discrimination;  lower  the  tariH',— not  when- 
ever we  can  obtain  our  goods  from  abroad  at  a  lower  rate, 
but  whenever  the  prices  exacted  by  any  trust  or  any  corpor- 
ation or  any  individual  are  in  excess  of  a  fair  profit  after 
paying  American  wages.  The  establishment  of  an  export 
trade  in  any  article  should  be  treated  as  presumptive  evi- 
dence of  the  lack  of  need  of  a  tarilf,  and  the  tariff  upon 
such  article  should  be  continued  only  when  it  has  been 
clearly  shown  that  sales  abroad  are  the  result  of  excep- 
tional circumstances.  If  the  patent  laws  are  being  per- 
verted from  their  true  purpose,  let  them  be  modified.  Com- 
pel corporations  to  bear  their  fair  proportion  of  taxation; 
let  the  public  retain  and,  in  so  far  as  is  lawful,  retake  all 
public  utilities  and  franchises.  Eequire  corporations  to 
pay  fair  taxation  upon  the  franchises  possessed  by  them, 
as  has  been  done  in  the  State  of  Xew  York  under  the 
clianipion.-hip  of  (Governor  I^oosevelt.  In  fine,  withdraw 
every  special  |)rivilege  and  leave  tlie  way  open  for  a  free 
fight  and  a  fair  field.  ''  i^ut  how  much  can  be  accomplislied 
by  this  nu'thod?  ''  We  answer:  "  Do  this,  and  trusts  will 
wither  away  hy  the  score,  if  not  by  the  hundred.  Do  this, 
and  trust  evils  will  nearly  all  be  done  away  with."  It  is 
somewhat  peculiar  that  those  peopU\  wlio  have  been  most 
actively  engaged  in  that  form  of  anti-trust  legislation 
wliich  seeks  to  render  inii)ossil)h'  all  consolidation  and 
combination, — who    liave    been    active    in    framing    laws 


3o6  The  Trusts 

which,  if  literally  construed,  would  prevent  even  such  a 
combination  or  restraint  upon  trade  as  the  formation  of  a 
partnership,  or  the  purchase  by  one  man  of  a  factory  or 
a  store  or  a  farm  or  any  other  producing  or  distributing 
agency  wdiich  formerly  belonged  to  another, — have,  in  their 
denunciations  of  trusts,  almost  uniformly  declared  that  the 
cause,  not  only  of  the  existence  but  of  the  strength  of 
trusts,  was  special  privileges,  and  yet  have  not  concentrated 
their  energies  in  efforts  to  abolish  these  special  privileges, 
but  have  dissipated  their  energies  in  their  attempts  to  stop 
all  combination,  consolidation,  and  concentration, — condi- 
tions towards  which  there  is  a  tendency  which  is  universal 
and  apparently  irresistible,  and  which  has  also  been  the 
trend  of  all  industrial  and  social  progress.  Thus  Hon. 
Jerry  Simpson,  the  Populist  member  of  Congress  from 
Kansas,  who  is  an  advocate  and  supporter  of  the  Kansas 
law  against  trusts,  in  his  address  at  the  Anti-Trust  Confer- 
ence in  Chicago,  declared: 

"  I  do  not  believe,  as  some  do,  that  the  combinations  we  call 
trusts  are  the  results  of  orderly  evolution  in  business  methods.  I 
think  I  can  easily  demonstrate  that  they  have  their  origin  in,  and 
grow  and  fatten  upon,  special  privileges  conferred  by  legislative 
bodies;  and  that  without  these  special  privileges  it  would  be  im- 
possible for  them  to  exist.  If  this  be  true,  it  would  seem  that  the 
first  and  most  necessarj'  step  would  be  to  repeal  the  laws  on  which 
they  rest,  rather  than  to  enact  new  laws." 

Tliat  plank  is  broad  enough  for  bt)th  Jerry  Simpson  and 
ourselves  to  stand  upon.  His  remark  is  one  of  tlie  sensi- 
ble declarations  made  in  the  discussion  of  trusts. 

In  one  of  the  recent  numbers  of  The  North  American 
llcview  there  appeared  an  analysis  of  the  Texas  anti-trust 
law  by  Governor  Sayers  of  that  state.  He  was  most  in- 
strumental in  the  passage  of  iliis  law.  He  even  called  a 
conference  of  the  governors  of  all  the  states  of  the  ("nion 
for  the  purj)0se  of  considi-ri ng  auti-trust  legislation,  and 


The  Remedy  for  the  Evils  307 

doubtless  considered  this  Texas  bill  as  the  acme  of  per- 
fection. The  most  interesting^  tiling-  about  the  article  in 
which  the  analysis  appeared  is,  that  (iflcr  i,nving  the  analysis 
of  the  law,  and  afler  pointing  out  a  few  of  the  evils  of 
trusts,  Governor  Savers  discussed  the  causes  of  trusts.  We 
quote  from  his  article: 

"It  has  been  assorted  by  some  who  claim  themselves  qualified  to 
speak  upon  the  subject,  that  trusts,  as  operated  in  tlie  United 
States,  are  not  harmful,  but  that  they  are  only  the  outgrowth  of 
an  evolution  in  industrial  life  that  is  natural  and  necessary.  On 
the  other  hand,  it  is  insisted,  and  I  think  rightfully,  that  they  are, 
in  a  great  measure,  if  not  entirely,  due  to  vicious  legislation,  to 
tlio  policy  of  the  Federal  government  in  tlie  matter  of  currency 
and  taxation,  and  to  that  of  the  states  in  the  creation  of  corpora- 
tions." 

We  think,  it  must  be  admitted,  that  the  Texas  anti-trust 
law  is  a  non-si'quitur  to  the  arsjriment  advanced  by  Governor 
Savers.  The  weakness  of  his  course  in  regard  to  trusts 
is,  that  he  has  not  attempted  to  concentrate  his  energies  to 
removing  that  which  he  declares  to  be  the  cause.  This 
is  said  in  no  spirit  of  criticism  and  with  a  perfect  under- 
standing that  Governor  Sayers' official  iniluence  at  that  time 
could  be  asserted  only  through  state  legislation.  The  point 
W(>  W(nild  make  is  this:  that  the  way  to  abolish  trusts  is  to 
remove  their  causes.  If  special  privileges  are  the  causes  of 
trusts,  abrogate  those  privileges.  While  we  may  not  all 
agree  as  to  tlie  special  privih>g(is  that  do,  in  fact,  foster 
trusts,  y{M  we  can  all  act  unitedly  in  a  cam]iaign  directed 
against  those  things  which  ar(>  conee(U'd]y  privileges  that 
have  this  elTrct,  for  tln'  trusts  that  can  succeed  only  by  the 
help  of  special  [irivileges  are  econondcally  inferior.  The 
trusts  that  hav(>  tlie  s])eeial  privileges  and  yet  do  not  need 
them,  are  thieves  and  robbers. 

Aft(U-  we  have  strip]ied  all  competitors  of  special  priv- 
ileges; after  we  have  created  a  fair  field  for  them,  we  must 


3o8  The  Trusts 

take  steps  to  see  that  there  is  a  fair  fight.  Unfair  com- 
petition, cut-throat  competition,  that  is,  the  practice  of 
selhng  goods  helow  cost  in  the  locality  in  which  competi- 
tion springs  up  while  charging  a  higher  price  in  some  other 
locality,  must  be  declared  by  law  to  be  a  conspiracy  and 
should  be  punished  with  severe  penalties.  The  provision 
of  the  Texas  law  concerning  this  kind  of  competition  is 
one  worthy  of  adoption  by  all  states.  In  like  manner  these 
great  corporations,  whose  powers  are  given  to  them  by  the 
state  and  which  are  able  by  reason  of  these  charter  powers 
to  obtain  such  a  great  control  over  industries,  must  be  com- 
pelled to  sell  to  all  at  the  same  rates.  When  so  many  of 
them  combine  together  that  the  establishment  of  new  com- 
petitive enterprises  becomes  economically  wasteful,  then 
we  have  the  right  to  treat  them  as  we  do  common  carriers 
and  make  them  serve  all  alike. 

Publicity  must  be  another  great  co-ordinate  remedy.  We 
need  it  to  correct,  not  only  incidental,  but  inherent  evils  of 
trusts;  to  encourage  competition  whenever  competition  is 
practicable,  to  expose  to  us  the  exact  nature  of  the  evils 
of  trusts,  to  bring  out  under  the  glare  of  public  disap- 
proval those  practices  which  flourish  only  in  darkness  and 
secrecy.  "We  must  liavo  full,  open,  and  accurate  reports 
from  trusts,  upon  forms  prepared  by  the  government,  sworn 
to  by  the  ofhcers  of  these  corporations.  We  must  also  have, 
in  tlie  case  of  gigantic  corporations  which  possess  gigantic 
powers,  inspection  by  public  officials  just  as  our  banks  and 
insurance  companies  are  subjected  to  sucli  inspection;  and 
further,  we  must  have  full  tabulated  statistical  informa- 
tion. Competition  will  certainly  spring  up  under  such  cir- 
cumstances whether  or  not  the  competition  is,  in  fact, 
needed.  TTigh  prices  will  sooner  or  later  cause  tlie  cstab- 
lishmeiit  of  new  enterprises:  while  the  fear  of  new  enter- 
prises always  has  a  ieiulcncy  to  keep  prices  down.    Wages 


The  Remedy  for  the  Evils  309 

can  never  be  reduced  to  the  starvation  point,  if  the  condi- 
tion of  both  cmplo}'er  and  employee  i.s  known.  Corrup- 
tion will  llee  when  secrecy  is  dispelled.  With  equality  of 
opportunity,  with  a  fair  held  and  a  free  fight,  there  arc 
comparatively  few  business  men  who  to-day  would  not 
accept  the  challenge  and  enter  into  competition  even 
with  great  corporations.  When  they  did  not  it  would  have 
to  be  considered  as  an  admission  of  the  economic  superior- 
ity of  the  trust.  Then  let  us  also  enact  laws  forbidding 
over-capitalization,  permitting  the  issue  of  stock  only  for 
cash,  or  for  the  actual  value  of  property, — earning  capacity 
and  good-will  to  1)0  taken  into  consideration,  but  full 
knowledge  of  that  upon  which  the  value  is  based,  to  bo 
given  to  the  investing  public  and,  if  need  be,  the  value  of 
these  properties  to  be  passed  upon  by  a  commission  ap- 
pointed for  the  purpose  rather  than  by  the  directors  and 
officers  of  tlic  company  entrusted  with  its  management  and 
under  constant  temptation  to  manijnilate  its  affairs.  Pub- 
licity will  prevent  most  of  these  evils;  it  will  stop  most  of 
the  stock  mani]n]lation  and  nearly  all  of  the  swindling  of 
the  investing  public.  Let  us  also  pass  laws  more  stringently 
regulating  corporate  management,  l^et  us  hold  the  direct- 
ors and  officers  to  a  greater  responsif)ility.  It  is  necessary 
tliat  we  limit  the  liability  of  stockholders  because  of  the 
impossibility  of  tlieir  mannging  the  affairs  of  the  company, 
but  this  applies,  only  in  a  slight  degree,  to  the  boards  of 
directors.  They  have,  to  a  great  deg-rec,  the  control  of  these 
companies.  True,  many  of  the  affairs  must  be  manacred  bv 
officers  cliosen  I)y  the  directors,  and  acting  for  them,  but 
it  is  absurd  to  limit  the  liability  of  these  officers,  and  it  is 
equally  absurd  to  limit  the  lialiility  of  the  directors  as  much 
as  one  does  the  lial)ility  of  rhe  stockliolders.  The  directors 
of  all  corporations  should  be  held  to  at  least  the  same  meas- 
ure of  liabilitv  that  trustees  of  savings  banks  and  national 


3IO  The  Trusts 

banks  assume.  It  should  be  made  criminal  to  declare 
dividends  if  unearned;  and  there  are  numerous  other  evil 
practices  in  the  management  of  corporations,  especiallv  of 
those  great  corporations  known  as  trusts,  which  could 
easily  be  prevented  by  prohibitory  statutes  strictly  enforced 
and  by  holding  the  directors  and  officers  personally  respon- 
sible for  the  corporations'  criminal  acts  in  which  they  par- 
ticipate. 

So  much  for  the  remedies  for  the  incidental  abuses  of 
trusts:  Are  there  other  evils?  Are  the  remedies  which 
have  been  suggested  sufficient?  We  do  not  say  that  they 
are,  but  we  express  a  firm  conviction  that  if  these  remedies 
could  be  honestly  tried,  all  that  would  remain  of  trusts  or 
of  trust  evils  would  be  relatively  insignificant.  Abolish 
special  privileges,  prevent  unfair  competition, — cut-throat 
competition, — compel  corporations  to  sell  to  all  upon  equal 
terms,  give  us  full  publicity,  prevent  the  evils  of  over- 
capitalization, make  corporate  management  honest, — and 
competition,  we  believe,  will  do  the  rest. 

But  there  are  other  things  which  we  can  do,  which 
theoretically  are  perfectly  proper,  which,  at  times,  may  be 
supplementary  remedies  and,  indeed,  may  be  our  best 
remedies  if  we  cannot  persuade  ourselves  to  adopt  those 
already  mentioned.  We  can  declare  the  creation  of  a 
monopoly  to  be  a  crime.  We  mean  now,  not  a  legal  mon- 
opoly but  a  practical  monopoly;  that  is,  the  acquirement 
of  such  a  control  over  an  industry  tbat  in  a  certain  looalilv 
and  for  a  length  of  time,  short  though  it  may  be,  a  per- 
son or  combination  of  persons  has  power  to  fix  the  price 
of  an  article  of  common  use.  It  will  be  very  difficult — in 
a  statute  extremely  diificult — to  define  a  monopoly  of  this 
kind;  and  yet  it  does  not  follow  that  it  cannot  be  done. 
You  may  search  all  the  law  l)0oks  that  were  ever  written 
and  vou  will  find  no  satisfactorv  definition  of  "  fraud.""  The 


The  Remedy  for  the  Evils  31 1 

court?,  t]iou(jh  for  centuries  thcv  liavc  had  to  deal  with 
fraud,  have  never  yet  undertaken  to  define  it  with  any 
accuracy,  for  tlie  reason  that,  if  once  defined,  some  one 
Avould  perpetrate  a  fraud  that  would  fall  outside  of  the 
definition.  But  the  courts  thousands  of  times  in  ever}'  year 
in  every  state  declare  contracts  void  because  of  fraud;  and 
so,  althouirh  it  may  be  impossible  to  frame  any  satisfac- 
tory definition  of  monopoly,  that  is,  of  what  we  may 
term  '"practical  monopoly"  as  distin^ruishcMl  from  legal 
monopoly,  or  exclusive  right  given  by  the  sovereign,  yet 
our  courts  have  not  shown  themselves  incompetent  to  dis- 
cern it  or  unable  to  punish  it.  "Ye  shall  know  them  by 
their  fruits  "  is  as  ap])licable  to  monopoly  as  it  was  to  the 
men  of  hypocritical  pretensions  of  whom  the  words  were 
first  spoken.  You  can  ascertain  whether  a  combination  is 
a  monopoly  by  observing  what  it  docs  and  how  it  does  it. 
When  a  great  aggregation  or  combination  acquires  such  a 
conlrol  over  industry  as  has  the  American  Ice  Companv, 
for  example;  when  the  people  for  weeks  look  in  vain  for 
any  otlier  source  from  which  they  may  obtain  their  supply 
of  this  necessity  of  life;  when  they  see  the  few  men  who 
are  the  oiTiccrs  of  this  trust  raising  the  price  from  thirty 
cents  to  sixty  cents  a  hundred  (even  though  it  is  for  only 
a  month);  when  they  find  this  com]-»any  in  possession  of 
docking  privileges  which  are  so  exceptionally  convenient 
and  advantageous  that  they  are  almost  exclusive;  when  they 
sec  it  mercilesslv  refusing  to  sell  ice  in  small  quantities  to 
the  poor  (refusing  to  sell  five-cent  pieces  until  compelled 
to  do  so  In-  tlie  force  of  a  righteous  public  indi.gnation), 
although  having  practically  the  sole  supply  of  ice:  when 
thev  recall  the  fact  that  this  company  sold  its  ice  a  year 
ago  in  most  localities  for  thirty  cents  a  hundred,  yet  that 
in  another  localitv  where  cornpetition  existed,  it  reduced 
the  price  in  ton  cents  a  hunrlred  so  ns  to  crush  out  its  com- 


312  The  Trusts 

petitor;  when  they  observe  it  leaguing  itself  with  cer- 
tain officers  who  have  charge  of  the  docks  where  ice 
must  be  unloaded,  with  other  oflicers  whose  duty  it  is 
to  make  contracts  for  the  purchase  of  ice  for  the  great 
municipality  in  which  they  have  secured  all  the  available 
supply,  with  politicians  who  control,  with  more  than  a 
czar's  despotism,  the  political  machinery  of  Xew  York  City, 
with  judges,  by  whom  questions  as  to  the  legality  of  the 
trust  or  as  to  the  criminality  of  the  acts  of  its  officers  would 
naturally  have  been  brought, — when  all  these  facts  are 
brought  together,  no  man  in  the  possession  of  his  senses, 
no  man  whose  intellect  is  not  clouded  by  idiocy,  no  man 
whose  judgment  is  not  obscured  by  his  prejudices;  no  man 
who  can  read  human  motives  from  human  acts  or  reason 
from  cause  to  effect,  can  doubt  for  one  moment  that  the 
purpose  of  this  trust  was  to  secure  a  monopoly;  that  for 
a  time  it  was  a  grinding,  merciless,  and  oppressive  mon- 
opoly, and  that  the  economies  of  combination  and  consoli- 
dation, either  were  not  the  motives  for  the  formation  of  the 
company,  or  else  that  they  were  quickly  and  sliamelessly 
cast  aside.  A  state  which  did  not,  by  its  laws,  forbid  and 
proliibit  and  make  penal  such  an  aggregation  of  capital 
manifesting  such  purposes  and  directed  and  controlled  by 
men  displaying  such  motives  and  conducted  in  a  way  so 
hostile  to  the  people  and  so  injurious  to  the  public  inter- 
est,— a  state  which  did  not  use  every  means,  legislative, 
executive,  and  judicial,  to  crush  out  such  a  trust  or  com- 
bination, could  not  be  considered  as  a  government  that 
guaranteed  and  insured  to  its  citizens  the  blessings  of  life, 
liberty,  or  property.  Attorney-General  Davies  of  New 
York  only  acted  in  the  discharge  of  his  official  obligations 
when  he  instituted  proceedings  to  dissolve  the  American 
Ice  Company,  but  although  ho  did  only  his  sworn  duty, 
ho  is  ontirlerl  to  praise  and  irraiitudc  and  to  the  loyal  sup- 


The  Remedy  for  the  Evils  313 

port  not  only  of  the  people  of  New  York,  whose  servant 
he  is,  but  of  all  who  hate  monopoly  and  oppression  and 
exaction  and  extortion.  We  may,  then,  properly  prohibit 
by  law, — we  should,  in  fact,  prohibit  by  law  any  combina- 
tion which  acts  as  a  general  restraint  upon  competition, 
and  which  is  formed  for  the  purpose  of  raising  prices,  or 
which  actually  does  raise  prices  beyond  the  fair  profit  mark. 
We  can  best  tell  whether  there  is  such  a  restraint  by  ob- 
serving results.  It  would  be  an  economic  folly  to  forbid 
all  combinations;  neither  should  we  be  alarmed  by  great 
aggregations  of  industry.  We  have  seen  their  wonderful 
economic  advantages;  we  have  noticed  how  such  consolida- 
tions and  combinations  may,  if  rightfully  used,  bring  not 
only  riches  to  their  promoters,  but  wealth  to  the  nations; 
how  they  may  enable  us  to  obtain  industrial  supremacy; 
how  they  may  give  more  constant  employment  to  our 
laborers;  how  they  may  stimulate  the  demand  for  our  raw 
materials;  how  they  may  lessen  the  price  of  manufactured 
goods;  how  they  may  bring  us  national  and  industrial 
prosperity  and  happiness.  It  is  most  difficult  to  say  what 
combinations  are  proper  and  what  ones  improper,  or  to 
lay  down  any  general  rules  by  which  one  can  determine 
whether  a  restraint  upon  competition  is  a  good  or  an  evil, 
whether  it  is  reasona])le  or  unreasonable.  Almost  every 
case  will  have  to  be  judged  from  the  circumstances  sur- 
rounding it  and  the  courts  will  have  to  determine  from  all 
the  facts  of  the  case  whether  it  is  reasonable  or  unreason- 
able. They  have  done  so  in  cases  that  have  occurred. 
Thf>y  have  adjudged  many  combinations  to  l)e  void  be- 
cause against  public  policy.  It  is  very  doubtful  if  we  can 
obtain  more  satisfactory  results  by  legislation.  It  may  be 
regretted  tliat  we  cannot  more  detinitely  determine  and 
more  explicitly  declare  what  combinations  are  improper, 
and  what  restraints  upon  competition  will  be  tolerated  and 


314  The  Trusts 

what  ones  prohibited.  It  is  doubtless  this  feeling  that  has 
caused  the  enactment  of  our  so-called  anti-trust  laws.  Even 
the  drastic  ones  adopted  in  many  of  our  Southern  and 
Western  states  ought  not  to  be  condemned  as  being  in- 
spired wholly  by  envy  or  jealousy.  They  are  probably  so 
sweeping  in  their  provisions,  simply  because  it  is  desirable, 
especially  in  penal  statutes,  that  there  be  no  uncertainty  as 
to  what  is  forbidden.  In  order  that  unreasonable  restraints 
upon  competition  may  be  punished  and  because  of  the 
doubt  as  to  what  is  reasonable  and  what  unreasonable, 
the  legislators  of  many  of  our  states,  fearing  the  evils  of 
monopoly  and  of  a  general  restraint  upon  competition, 
have  not  infrequently  forbidden  all  restraints  of  competi- 
tion. The  motive  that  underlies  the  statutes  has  probably 
been  good,  btit  in  the  means  adopted  these  legislators  have 
almost  always  overreached  themselves.  The  difficulty  of 
proving  purpose  and  motive  has  led  them  not  infrequently 
to  forbid  even  combinations  and  agreements  that  may  or  do, 
indirectly  as  well  as  directly,  incidentally  as  well  as  inten- 
tionally, restrain  competition.  But  when  statutes  so  sweep- 
ing are  enacted,  they  forbid  the  contracts  which  come  up 
in  our  daily  business  negotiations  and  which  are  innocent 
in  their  character.  The  result  is  that  the  courts  are  com- 
pelled to  construe  these  laws  either  as  unconstitutional  be- 
cause of  being  violations  of  our  right  to  the  use  of  our  prop- 
crtv,  or  else  they  are  bound  to  construe  them  as  referring 
only  to  unreasonable  restraints.  ]\[r.  David  Willcox,  a  New 
York  lawyer,  counsel  for  various  trusts,  in  an  article  in 
The  Forum  for  Septemljcr,  1897,  gave  many  illustrations  of 
the  vast  number  of  every-day  transactions  which  were  pro- 
hibited by  statutes  of  this  character.    We  quote  from  him: 

"That  the-^o  jirovisions  are  not  diroefcd  cppocially  against  com- 
binations, is  slidwn  by  tlio  fact  that  the  most  ordinary  and  ous- 
tomarv  contracts  or  arranircnient.s  mmj  incidentally  restrain  or  pre- 


The  Remedy  for  the  Evils  315 

vent  competition,  altlioiij^di  that  may  he  only  remotely,  if  at  all, 
their  object.  As  instances,  may  he  su}T<,'este(l:  All  organizations 
of  mechanics  enf^aq-ed  in  the  same  line  of  Imsine-s  for  the  ])ur])oso 
of  limitinij  the  number  of  perscms  enj^'a^'ed  in  the  business,  or  of 
maintaininj,'  hifjh  rates  of  \vaj,'('s;  a  covcnatit  in  a  (h-ed  restrict- 
ing the  use  of  real  estate";  the  formation  of  a  cijrporation  to  carry 
on  any  business  upon  a  lar<re  scale;  a  contract  of  partnership  be- 
tween two  persons  previously  en<iaf^e<l  in  the  same  line  of  busi- 
ness; the  appointment,  by  two  producers,  of  the  same  person  to 
sell  their  goods  on  commission;  the  purchase,  by  one  wholesale 
merchant,  of  the  product  of  two  producers;  the  lease  or  purchase, 
by  a  farmer,  manufacturer  or  merchant  of  an  additional  farm, 
manufactory  or  shop;  the  withdrawal  from  business  of  any  farmer, 
merchant  or  manufacturer;  tlie  cessation  of  production  of  any 
agricultural  or  manufactured  {)roduct,  or  the  suspension  of  mining, 
because  of  lack  of  demand;  a  sale  of  the  good-will  of  a  business, 
with  an  agreement  not  to  destroy  its  value  by  engaging  in  similar 
business.  In  fact,  any  one  who  suspends  or  w  ithdraws  from  busi- 
ness, by  that  veni-  act  will,  in  some  degree,  restrain  or  prevent 
competition.  Equally,  any  one  who  enlarges  his  business  will  re- 
strain or  prevent  competition  by  crowding  out  others.  Examples 
might  be  multiplied  indefinitely." 

The  state  can,  then, — it  must,  tlien,  if  it  discharires  its 
duties  towards  its  citizens,— proliiliit  the  actual  nioiiopolv. 
It  must  forbid,  and  by  ])enalties  en(]eavor  to  prevent,  all 
vnrra.'^onahlr  restraints  upon  competition.  It  mu-t  drclaro 
criminal  any  combination  for  the  purpose  of  raishig  prices, 
or  which  does  in  fact  improperly  raise  prices.  It  is  douht- 
ful  if  it  can  constitutionally  do  more,  since  the  Constitu- 
tion of  tlie  r'uited  v^rates  in  the  fourteeutii  amendment 
prohibits  th(>  sl;;l(\s  fr(un  deprivini:  any  person  of  life,  lil)- 
erty,  or  jiropcriy  withotit  due  process  of  law.  and  the  right 
to  pro]ierty  has  boon  held  l>y  thi^  coi;rt>  to  ho  the  ri'jht  to 
huy  and  sdl,  and  to  contract  with  reference  to  one's  prop- 
erty, in  any  way  v>hich  does  not  injure  another.  It  would 
be  folly  for  tlie  state,  even  if  constitutional,  to  endeavor  to 
restrain  all   com1)inations.   or   to   ])rnhibit   cveiy  restraint 


3i6  The  Trusts 

upon  competition;  for  \ve  all  know  by  actual  experience 
and  daily  observation  tbat  competition  is  often  excessive. 
AVe  know  that  time  and  time  again  it  has  been  impossi'ule 
to  stop  the  competition  by  mere  quitting.  It  is  only  when 
all  of  the  competitors  would  agree  to  stop  that  any  of  them 
could  be  induced  to  desist.  To  attempt  to  stop  all  com- 
bination would  be  to  ignore  all  the  experience  of  the  past. 
The  attempt  would  in  all  probability  be  futile.  For  years 
many  of  the  states  have  had  such  laws,  but  their  enforce- 
ment has  been  impossible.  Trusts  are  more  numerous  to- 
day than  ever  before.  But  if  we  could  stop  all  combina- 
tion, the  success  of  the  attempt  would  be  the  death-blow 
to  industry.  For  the  United  States  to  forbid  all  combina- 
tions, to  forbid  even  great  combinations,  would  be  to  throw 
aside  the  magnificent  opportunity  we  have  to-day  of  obtain- 
ing the  markets  of  the  world  and  of  winning  industrial 
supremacy  among  the  nations. 

Such  are  the  remedies  we  would  propose  for  trust  evils. 
But  it  is  not  amiss  to  discuss  here  certain  remedies  sug- 
gested by  others,  especially  the  proposition  to  restrain  com- 
binations, by  limitations  upon  corporate  powers  and  cor- 
porate capitalization. 

The  only  visible  effect  of  our  anti-trust  laws  up  to  this 
time  has  been  to  bring  about  a  chan::e  in  the  form  of  com- 
binations. We  no  longer  have  the  trust  proper;  the 
"  agreement "  combine  still  exists,  but  the  corporation  ia 
the  favorite  form  of  combination,  because  it  is  much  easier 
for  the  corporation  to  pose  not  as  a  combination,  but  as  a 
new  legal  entity.  There  are  some  wlio,  observing  the  great 
evils  that  come  from  the  over-capitalized  trust,  think  that 
our  anti-trust  laws  have  made  matters  worse  th;in  they 
were  before  their  passage;  that  they  have  not  enabled  us 
io  escape  the  old  evils,  but  have  piled  upon  us  a  host  of 
new  ones.     AVc  are  inclined  to  believe  that  on  tlie  whole 


The  Remedy  for  the  Evils  317 

the  state  is  in  a  much  more  advantageous  position  by  rea- 
son of  having  trusts  in  corporate  form.  Corporations  are 
artificial  creatures  of  the  state,  owing  their  life  to  it,  and 
])ecuhar]y  subject  to  limitations  by  it.  We  can,  if  we 
marslial  our  resources  and  gather  togetlier  our  forces,  deal 
eirecii\ely  and  successfully  witli  the  corporations,  even 
with  the  great  corporations,  and  with  all  the  problems 
arising  from  them.  Anti-trust  legislation  has  not  been  in 
vain  if  it  has  made  trusts  become  corporations,  for  wo  can 
handle  the  corporations,  if  we  choose.  To  enact  anti- 
trust laws  in  order  to  compel  combines  to  become  corpora- 
tions, and  to  be  able,  in  this  form,  to  remedy  the  evils  of 
trusts  is,  it  must  be  admitted,  much  like  the  practice  of  a 
certain  doctor  who  could  cure  no  disease  but  fits  and  who, 
therefore,  whenever  he  was  called  in  to  visit  a  patient,  pro- 
ceeded to  throw  him  into  a  fit,  and  then  to  cure  him.  If, 
after  all  the  remedies  that  have  been  mentioned  have  been 
tried,  we  find  that  the  trust  is  still  a  power  for  evil,  then 
we  can  limit  the  size  of  corporations;  we  can  prevent  thom 
from  consolidating  with  each  other;  we  can  forbid  their 
selling  their  stocks  one  to  tlie  other,  or  selling  their  plant, 
or  anything  but  their  product,  without  an  order  of  the 
court  made  for  sufficient  cause.  AVe  can  demand  the  full- 
est puldicity,  and  can  im|)ose  upon  these  creatures  of  the 
state  such  restrictions  and  limitations  as  their  Creator  may 
deem  wise. 

It  has  already  been  urged  by  economists  as  well  as  by 
statesmen  that  we  should  limit  not  only  the  size  of  our 
great  corporations,  Imt  the  })urposes  for  wliich  they  may  b: 
formed.  Such  is  the  suggestion  of  Prof.  Henry  C.  Adams, 
of  ^Michigan  University,  while  througliout  certain  sections 
of  our  country  there  is  a  popular  feeling  of  ajiproval. 

.Much  of  the  ojiposition  to  modern  corporatitms  is  liut  a 
new  instance  of  the  recurring  opposition  to  every  industrial 


3i8  The  Trusts 

advance  which  manifests  itself  in  the  formation  of  larger 
business  organizations.  It  is  no  new  thing  to  ask  for  the 
prohibition  of  tlie  increase  in  the  size  of  industrial  organ- 
iz;itions.  Such  requests  have  been  frequent  throughout 
industrial  history.  Xo  forward  step  has  ever  been  taken 
vvitliout  the  timid  and  hesitating  and  doubtful  crying  out 
in  alarm.  More  than  one  hundred  and  fifty  years  ago, 
w]ien  strictly  individual  ownership  and  management  of 
property  were  giving  way  to  tlie  partnership  form,  a  great 
cry  went  up.  People  considered  it  a  restraint  on  trade 
and  in  alarm  asked  what  was  to  become  of  manly  inde- 
pendence. When  the  small  business  corporations  began  to 
displace  the  cumbersome  partnerships,  timorous  people 
fairly  felt  the  clutch  of  monopoly,  so  great  was  their 
alarm  and  fear.  There  is  no  question  that  the  transition 
from  the  partnership  to  the  corporate  form  excited  as  much 
alarm  and  as  mucli  opposition  as  the  phenomenon  of  trusts 
does  to-day.  Adam  Smith  tried  to  quiet  the  popular  unrest 
by  attempting  to  prove  that  the  corporate  organization  of  in- 
dustry would  never  be  successful  or  popular,  and  could 
never  do  much  harm  because  it  was  adapted  only  to  a  few 
simple  routine  branches  of  business,  and  that  it  never 
could  obtain  loyal  and  efficient  service  from  its  employees 
because  in  his  opinion  "people  would  not  work  for  corpor- 
ations as  they  would  for  themselves." 

In  many  sections  of  the  country,  to-day,  hatred  and  ani- 
mosity towards  corporations  are  fostered  and  engendered. 
This  is  remarkably  true  in  those  sections  wliich,  from  tlic 
nature  of  their  resources,  are  noccs-arily  largely  agricul- 
tural, and  whicli.  therclore,  do  not  permit  of  combinations 
of  capital  to  develop  them.  Forgetful  of  all  the  wonderful 
])r(iuress  of  the  country  due  to  corporations,  unmindful 
tliat  it  is  the  industrial  prosperity  of  the  East,  built  up  by 
corporate  wealth,  that  gives  to  the  West  and  the  South  the 


The  Remedy  for  the  Evils  319 

nearest  and  steadiest  and  ricliest  market  for  their  af^^ricul- 
tnral  produuts,  and  which,  throu^di  its  mills  and  faetorics, 
creates  the  demand  for  their  raw  materials,  and  equally 
forgetful  of  the  fact  that  the  development  of  the  West  and 
South  themselves  is  due  to  the  inii)r()ved  means  of  trans- 
I)ortation  and  eommunieation  that  arc  possihle  only  when 
caj)ital  is  enormously  concentrated,  and  that  that  develop- 
ment has  also  heen  furthered  hy  corporate  capital  engaged 
in  manufacturing,  and  resulting  in  furnishing  to  the  West 
and  South  chea[)('r  tools,  cheaper  agricultural  implements, 
chea]ier  clothing  and  chea})cr  commodities  generally — 
forgetting  all  these  things,  in  these  sections  there  exists 
widespread  fear  of  corporations,  distrust  of  their  motives 
and  methods,  and  animosity  towards  their  organizers  and 
directors. 

Corporations  of  enormous  size  are  an  absolute  necessity 
to-day  to  do  the  wnrk  oi  tlie  world.  One  undertakes  the 
answer  of  a  jierplexiiig  ((uestion  when  he  endeavors  to  say 
how  mueli  capital  a  corporation  should  be  allowed  to  have. 
]->ven  within  the  limits  of  (me  trade  or  industry  it  is  almost 
inipussihle  to  determine  the  ([uestion  satisfactorily.  It; 
would  he  a  danger(nis  business  ])()liey  to  fix  an  arbitrary 
limit  to  capitalization — to  say.  for  instance,  that  no  cor- 
]ioratioii  could  l)e  incor])oraied  with  a  capital  exceeding  $1  ,- 
(10(1.(1(1(1  or  .^1(1. 0(10. (HMt.  In  one  industry  either  sum  might 
be  iiisutbcient  to  permit  ecom~)mical  production,  while  in 
another  it  might  enable  the  coi-poration  to  ol)tain  a  mon- 
opoly. Not,  at  lea>t,  until  we  have  learned  that  there  are 
evils  in  the  Lnirant  ic  corponi.t  ions  wliich  cannot  l)e  other- 
wisi>  avertt^d  can  we  alford  to  imitate  I'rocrustes.the  tyrant, 
who  placed  all  his  victims  on  one  bed.  stretching  tliose  who 
were  sliort  till  they  fitti'd  it,  atid  cutting  off  the  legs  of 
tliose  who  were  too  lonir.  Furthermore,  in  any  one  jiar- 
ticular  industrv,  it  would  be  most  ditlicult,  as  well  as  dan- 


320  The  Trusts 

gerous,  to  say  what  limit  should  be  fixed  to  capitalization; 
although,  if  monopoly  can  be  prevented  in  no  other  way, 
the  limitation  of  capitalization  is  a  practical  method  of 
procedure.  One  set  of  incorporators  may  possess  such  con- 
nections, have  such  skill,  and  meet  with  such  success  that 
it  can  profitably  employ  many  times  the  capital  that 
another  set  can  use.  The  formation  of  corporations 
should  be  regulated  by  general  laws.  There  are  many  ob- 
jections of  the  gravest  character  to  any  attempt  to  make  a 
special  determination  as  to  the  amount  of  capitalization 
that  any  corporation  or  class  of  corporations  shall  have. 
It  would  be  dangerous  to  attempt  to  pass  upon  each  sep- 
arate case.  Favoritism,  bribery,  and  every  form  of  corrup- 
tion are  incidental  to  special  legislation.  If  there  is  special 
legislation,  or  even  special  adjudication,  as  to  the  necessity 
or  wisdom  of  granting  a  charter,  or  as  to  the  amount  of 
capital,  there  will  be  abuses  and  scandals  of  every  sort. 
The  right  to  incorporate  will,  then,  surely  become  a  special 
privilege.  It  will  be  obtained  by  the  great  and  the  cor- 
rupt, and  denied  to  the  weak;  and  the  ability  to  incorpo- 
rate will  then  become  a  monopolistic  right. 

Until  experience  has  demonstrated  that  corporate  abuses 
are  beyond  practical  control,  it  would  seem  to  be  equally 
unwise  to  say  that  capital  may  clothe  itself  in  corporate 
form  and  seek  corporate  management  only  when  used  in 
certain  particular  industries  or  kinds  of  enterprises.  Prof. 
Adams  has  suggested  that  corporations  should  be  created 
only  for  purposes  of  transportation  or  for  the  management 
of  enterprises  that  are  in  their  nature  public  or  quasi- 
public;  that  the  right  to  engage  in  ordinary  enterprises 
and  industries  which  can  be  carried  on  by  individuals, 
either  singly  or  associated  in  other  than  corporate  relations, 
should  be  denied  to  corporations.  While  this  cannot  be 
discussed  here  with  the  fullness  that  so  momentous  a  sug- 


The  Remedy  for  the  Evils  321 

gestion  by  so  eminent  an  authority  deserves,  it  need  only 
be  said  that  such  a  course  would  be  contrary  to  a  tendency 
so  universal  as  to  be  apparently  natural  and  irresistible, 
and  it  would  appear  to  bo  a  retrogression  in  the  industrial 
march. 

Hon.  Dudley  G.  Wooten  of  Texas,  the  first  vice-chair- 
man of  the  Chicago  Trust  Conference,  in  a  most  eloquent 
speech  upon  that  occasion,  in  which  he  denounced  indus- 
trial corporations,  big  and  little,  and  urged  that  charters 
should  not  be  granted  to  them  to  engage  in  business  enter- 
prises in  which  individual  effort  could  work  profitably, 
said: 

'■  It  ought  to  be  impossible  for  corporations  to  be  chartered  for 
any  other  than  a  quasl-puhlic  purj>ose  with  a  capital  authorized 
beyond  a  reasonable  amount  commensurate  with  the  equality  be- 
tween natural  and  artificial  citizenship  and  industry." 

In  an  earlier  part  of  his  speech  he  said  of  the  people  of 
Texas: 

"  We  are  mainly  producers  of  raw  materials  and  consumers  of 
manufactured  products," 

and  then  he  j)ointed  out  how  Texas  felt  particularly  injured 
by  trusts.  ]s  not  the  experience  of  Texas  itself  a  proof  of 
the  economic  injury  of  the  policy  so  eloquently  urged  by 
]\Ir.  Wooten?  No  community  can  ])ecome  rich  without 
labor.  The  greater  the  amount  of  work  it  puts  forth,  the 
more  valuable  tlu^  product.  No  state  can  liecome  jirosper- 
ous  without  a  diversity  of  industry.  A  purely  agricultural 
community  can  never  be  very  rich,  but  a  community  that 
takes  its  raw  ])roducts  and  ap])lies  to  tliem  the  labor  neces- 
sary to  perfect  ihem  for  final  consumption,  adds  to  the 
value  of  what  it  possesses  and  increases  the  wealth  that  will 
How  into  it  when  the  finished  product  is  sold  or  exchanged 
for  the  other  material  comforts  of  civilization  that  it  needs. 


322  The  Trusts 

Agriculture  does  not  in  its  immediate  operations  require 
vast  capital.  Individual  effort  is  sufficient,  coupled  with 
individual  savings  or  borrowings.  Indirectly,  however, 
successful  agriculture  is  indebted  to  centralized  capital  for 
improved  machinery  and  tools.  Manufacturing,  on  the 
other  hand,  cannot  be  carried  on  successfully  except  when 
the  capital  of  many  is  combined  with  the  labor  and  the 
toil  of  many.  Would  not  Texas,  with  its  vast  area  and 
great  resources,  be  a  more  prosperous  community  if  it  en- 
couraged associations  and  combinations  of  capital  to  build 
factories  in  its  midst,  instead  of  crippling  them?  Would 
not  its  farmers,  by  bringing  into  the  state  persons  who  en- 
gage in  other  fields  of  industry,  find  an  increased  army  of 
consumers,  whose  demand  for  agricultural  products  would 
increase  the  prices  which,  according  to  Mr.  Wooten,  trusts 
tend  to  depress?  Would  not  the  multiplication  of  fac- 
tories give  to  Texas  people  an  opportunity  to  buy  manu- 
factured articles  more  cheaply,  and  thus  offset  that  alleged 
tendency  of  industrial  trusts  to  impose  extortionate  prices? 
Favorable  corporation  laws  will  not  in  themselves  establi-h 
industries;  but  unfavorable  ones  will  surely  prevent  their 
establishment  and  kill  those  now  in  existence.  Would  it 
not  be  wiser  for  Texas  to  try  tliis  remedy  for  trusts? 

While,  in  the  present  stage  of  the  trust  problem,  any  at- 
tempt to  limit  either  the  size  or  the  purposes  of  corpora- 
tions seems  to  !)('■  a  |)remat'nre  and  hazardous  remedy 
because  of  the  probable  crippling  of  our  productive  powers 
and  tbe  impairing  of  our  chances  of  securing  markets; 
while  it  seems  mucli  wiser  to  endeavor  to  ensure  eqiuility 
of  opportunity  and  fairness  in  competition,  to  abolish  all 
special  privileges,  to  have  publicity  of  all  matters  affecting 
tlie  puljjie,  and  then  let  all  producers  and  distributers 
figlit  it  out  on  tbe  same  line,  eaeli  one  being  allowed  to 
bring  together  and  make  use  of  whatever  amount  of  capi- 


The  Remedy  for  the  Evils  323 

ial  he  can  profitably  employ,- — still  if  it  he  found  after  a 
trial  that  there  are  dangers  in  this  course  and  that  monop- 
oly does  exist  as  a  result  thereof,  then  the  limitation  of  the 
aiuount  of  capitalization  of  our  great  corporations  is  the 
quickest  and  most  practical  and  most  certain  way  of  pre- 
venting them  from  acquiring  a  controlling  interest  in  any 
industry.  It  is  not  extremely  improbable  that  we  will  be 
forced  to  limit  their  acquisition  of  those  properties  which 
are  more  or  less  natural  monopolies,  such  as  copper,  iron, 
coal,  gold,  and  silver  mines.  But,  at  best,  the  limitation 
of  the  capitalization  or  of  the  purposes  of  corporations  is  a 
kind  of  compromise  measure.  It  will  possibly  save  us  from 
some  of  the  evils  of  monopoly.  It  will  secure  to  us  a  part, 
bur  only  a  small  part,  of  the  benefits  of  combination.  We 
"will  save  only  a  few  of  the  wastes  of  competition.  We 
may  obtain  nearly  all  the  benefits  that  relate  to  mere  pro- 
duction itself,  but  we  are  certain  to  loee  most  of  the  econ- 
omics of  distribution. 

The  ])roblem  of  trusts  subbests  the  possibility  of  social- 
ism, or  of  that  modified  form  of  socialism  which  is  called 
government  ownership.  The  tendency  towards  concentra- 
tion  is,  in  the  opinion  of  many,  the  steady  mai'ch  towards 
socialism.  Xo  one  feels  more  certain  of  this  than  t"^;e 
socialist  himself;  no  (me  is  more  sanguine  than  he  in  'ms 
obhcrvation  of  the  size  and  the  ]H)wer  of  trusts.  At  their 
possibilities  of  monojioly  he  looks  complacently,  believing 
that  when  industry  shall  have  reachiNl  the  final  point  of 
exttc-me  centralization  ifs  managt>ment  and  ownership  wiil 
be  wresteil  away  from  tliose  now  ]>ossessing  it  and  taken 
over  by  the  pcoj^le  in  their  colleci  i\(^  ca|iacity.  Those  who 
en'rrtain  these  views  say  that  the  encouragement  of  tiie 
establisinnent  of  competitive  enterjiriscs  against  existing 
trusts  is  not  desirable,  even  to  kee])  down  prices.  They 
argue   that,   if   a   given   number  of   factories,   cither   run 


324  The  Trusts 

separately  or  by  one  trust,  is  enough  to  supply  the  de- 
mand for  commodities  of  that  kind,  then  it  is  an  economic 
waste  to  add  to  this  number  of  factories.  They  point  out 
that  to  encourage  competition  is  contradictory  to  the  al- 
most universal  tendency  of  the  present  day  to  combine  for 
the  very  purpose  of  saving  the  loss  of  undue  competition. 
They  show  that  the  encouragement  of  small  competitive 
enterprises  prevents  the  savings  that  trusts  or  combina- 
tions could  otherwise  effect,  and  they  claim  that  in  encour- 
aging the  return  of  competition  we  are  slowly  undermining 
the  power  of  trusts  for  good,  and  that  we  are  only  a  little 
less  foolish  than  those  who  so  fear  the  power  of  trusts  that 
they  render  them  useless  as  well  as  harmless  by  limiting 
the  capitalization  of  corporations  to  so  small  a  sum  that 
they  cannot  acquire  enough  property  to  avail  themselves 
of  the  means  and  methods  of  economical  production  and 
distribution.  These  persons  reprove  us  for  our  failure  to 
appreciate  what  they  consider  the  true  teachings  of  the 
universal  tendency  to  restrict  competition.  They  reproach 
us  for  our  hesitancy  in  trying  that  solution  of  all  these 
vexing  problems  which  they  think  this  universal  tendency 
suggests,  and  which  they  deem  to  be  not  only  correct 
theoretically,  but  sufficient  practically.  That  remedy  is  in 
so7no  form  or  other  socialistic.  It  implies  either  govern- 
ment ownership  or  management.  The  reasoning  of  the 
advocates  of  remedies  of  this  kind  is  plausible,  and  it  can- 
not be  denied  that  they  occasionally  fortify  their  argu- 
ments with  incontrovertible  facts.  They  themselves  are 
in  no-wise  dismayed  by  the  extent  of  the  task.  They  look 
at  the  number  of  instances  of  municipal  ownership  of 
waterworks  in  America,  of  government  ownership  of  rail- 
roads and  telegraphs  in  Europe,  and  ownership  by  Euro- 
pean cities  of  street  railways  and  of  gas  and  electric  light 
properties,  and  at  American  laws  regulating  rates  of  fare 


The  Remedy  for  the  Evils  325 

and  freight  on  raihvays,  and  find  in  them  precedents,  as 
well  as  encouraging  examples  of  governmental  control  and 
ownership.  ])oul)tless  certain  lines  of  business,  particu- 
larly transportation — not  only  trunk  lines,  but  city  surface 
pystems — and  the  providing  of  water,  gas,  and  electricity, 
and  the  disposal  of  sewage  and  kindred  public  services,  are 
natural  monopolies,  and  may  properly  and  successfully  be 
assumed  by  cities  and  states;  but  to  undertake  govern- 
ment control  of  those  industries  in  which  trusts  are 
formed,  namely,  manufacturing,  mining,  and  niercantile 
industries,  is  to  enter  upon  a  task  of  a  very  different  char- 
acter. Government  ownership  of  such  industries  may  be 
called,  not  improperly,  socialism  in  its  advanced  stage.  It 
may  be  that  in  distant  ages  that  will  be  the  form  of  busi- 
ness management,  but  it  surely  is  one  of  the  ideals  to  be 
realized  only  in  the  millennium. 

(Jovernment  conlrnj  oi  corporations  is  not  the  same  as 
governiiumt  ownership,  but  it  is  an  approach  to  it.  It  is 
prnbai)ly  fortunate  that  the  trusts  of  to-day  are  corpora- 
tions rather  than  individuals,  for  being  creatures  of  Law, 
they  are  properly  subject  to  restriction  by  law.  It  has 
been  seriously  suggested  that  the  pro]>er  course  with  regard 
to  industrial  coml)ination  is  to  encourage  or  permit  the 
formation  of  gigantic  corporations  which  may,  if  desired 
by  their  organizers,  obtain  all  the  productive  agencies  of  any 
one  industry;  and  then  to  enact  laws  limiting  their  profits, 
or  arbitrarily  fixing  prices.  Doubtless  it  would  be  possible 
to  enact  laws  limiting  dividends,  and  perhaps  it  would  be 
possible  to  express  the  laws  in  such  terms  as  to  prevent 
many  evasions,  and  practically  to  accomjdish  the  purpose 
of  the  act;  namely,  to  limit  ]irices.  The  ]ienalty  for  refus- 
ing to  do  the  work  for  wliich  a  ctunpany  was  incorporated, 
at  prices  wliich  would  proilucc  ilio  profit  arbitrarily  fixed, 
woukl  be  dissolution.     Doubtless  a  stale  or  a  government 


326  The  Trusts 

could  with  perfect  propriety  say  to  a  corporation  of  its 
creation,  at  the  time  of  its  incorporation,  that  it  should 
charge  only  a  certain  price  for  a  certain  service,  or  that  all 
of  its  profits  above  a  certain  amount  should  revert  to  the 
state.  States  have  been  known  to  do  similar  things  in  the 
case  of  railroad  and  gas  companies  and  other  quasi-public 
corporations.  But  economically  it  would  be  the  height  of 
folly  to  do  this  whenever  competition  was  practicable. 
There  are  many  objections  to  a  scheme  to  limit  profits. 
One  is  that  it  is  manifestly  unfair  to  impose  a  limit  unless 
a  fair  profit  is  practically  guaranteed. 

The  vital  objection,  however,  is  that  a  limit  to  profits 
means  a  halt  to  industrial  progress.  If  a  corporation  can 
declare  no  dividend  in  excess  of  a  fixed  per  cent,  there  is 
no  inducement  for  it  to  cheapen  its  product.  There  is  no 
incentive  to  inventive  talent.  What  would  be  the  use  of 
introducing  a  labor-saving  machine  if  one  did  not  make 
more  money  by  so  doing?  To  limit  dividends  would  be 
the  worst  folly  imaginable.  It  would  be  less  foolish  to 
limit  prices;  to  say  to  a  great  monopoly:  ''  You  shall  not 
charge  more  than  tliis  sum,  but  if  you  introduce  labor- 
saving  machines  and  are  thus  able  to  produce  more  cheaply 
and  to  make  a  greater  profit  at  those  prices,  you  may  liavc 
it."  Who  is  tlicrc,  however,  wise  enough  to  say  what 
prices  shall  be  charged?  Dividends  could  possibly  be  lim- 
ited, with  provisions  that  any  savings  which  were  the  result 
of  ehoa])cr  processes  or  labor-saving  machinery  should 
accrue  for  limited  periods  to  the  persons  introducing  them, 
just  as  ve  give  temporary  monopolies  to  inventors.  But 
all  limitation?  on  profits  are  restraints  upon  progress;  the 
danger  from  them  is  that  industry  may  become  stagnant 
and  dormant  and  decadent. 

Th(>  belief  in  abstaining  from  intervention  in  private 
Ijusiness  matters  is,  moreover,  so  deep-rooted  in  Americans 


The  Remedy  for  the  Evils  327 

that  a  propopition  to  limit  the  profits  of  corporations 
Avould  be  rehietantly  adopted  even  as  a  last  resort.  Un- 
questionably, in  tlie  face  of  the  very  fact  that  business  is 
everywhere  beintj^  organized  into  threat  combinations  for 
the  purpose  of  killini,''  competition,  the  people  of  this  coun- 
tiT  prefer  still  to  trust  to  tiie  restraininc;  inlUnmce  of  the 
active  competition  that  survives  and  to  potential  competi- 
tion, and  to  enact  laws  that  will  place  competitors  on  an 
equal  footinfj,  rather  than  to  socialize  industry  and  npsct 
all  tlieir  established  systeins  and  notions.  Government 
ownership,  or  government  management  or  control  of  ordi- 
naiy  business  enterprises  by  means  of  price  regiilati':n  or 
dividend  limitation,  is  an  iridescent  dream.  It  is  a  matter 
more  of  sjteculation  than  practical  st:;ti'smanship.  It  m;;y 
he  a  live  issue  long  before  the  sun  grows  cold,  hut  it  is  not 
the  matter  at  hand.  It  is  not  the  duty  that  lies  before  i^s. 
The  practical  man  of  the  day — the  man  who  suffers  the 
evils  of  trusts  and  who  seeks  remedies — still  lielieves  that 
relief  is  to  be  found  in  the  preservation  of  competition, 
and  tlie  remedies  that  lie  would  adopt  are  remedies  that 
secdc  to  remove  the  obstacles  to  free  and  fair  competition, 
namely,  the  abolition  of  special  privileges,  the  prohibition 
of  unfair  competition,  the  requirement  of  that  open  puh- 
liciiy  whieli  calls  competition  into  luung.  the  punishment 
of  all  unreasonable  rc-^irainfs  upon  competition,  the  pre- 
vention of  (^-erything  which  creates  actual  monopoly  or 
Avhicli  is  formed  for  the  puq"»ose  of  raising  prices  or  which 
actually  doo>  raise  ])ricr>s.  All  those  arc  remedies  that  tiuid 
to  preserve  that  system  of  industry  which,  with  all  it- 
wastes  and  sacrifice-,  all  its  evils  and  injuries,  has  neverthe- 
](>-s  been  iiie  secrcl  of  all  industrial  success  and  of  the 
world's  prosiicrity. 

The  r(^;d  need  of  the  dav.  the  pressing  need,  is  informa- 
tion— publicitv.     "We  need   it,  not  oulv  in  order  to  know 


328  The  Trusts 

what  to  do,  but  as  a  remedy  in  itself.  If  we  can  have  this 
publicity  we  can  rely  to  a  great  extent  upon  competition, 
active  as  well  as  potential.  We  cannot  for  any  great  length 
of  time  be  made  the  victims  of  extortion  by  trusts  if  their 
methods  are  open.  We  shall  net  long  be  charged  more  than 
a  fair  profit  if  their  profits  are  known.  High  prices  and 
big  profits,  if  known  to  the  public,  will  surely  bring  that 
competition  which,  through  all  history,  has  saved  us,  and 
which  is  as  certain  in  its  operation  as  natural  forces.  Cap- 
ital will  as  surely  be  attracted  to  enterprises  known  to  be 
profitable  as  the  needle  of  the  compass  is  sure  to  be  at- 
tracted to  the  north.  This  is  so,  even  although  new  estab- 
lishments are  not  really  needed  for  productive  purposes. 
Knowledge  is  power  to  those  who  seek  to  ward  off  monop- 
oly, but  popular  ignorance  of  their  profits  is  the  great 
secret  of  the  trusts'  occasional  ability  to  charge  undue 
prices. 

Publicity  by  officers  and  directors  and  promoters  of  all 
our  great  corporations  may  not  be  a  complete  cure,  but  it 
is  sure  to  be  one  of  the  most  effective  remedies  for  all  the 
evils  of  trusts.  It  will  unquestionably  restrict  the  creation 
and  establishment  of  all  those  trusts  whose  purposes  are  to 
plunder  the  community  and  to  fleece  investors;  probably 
half  of  the  trusts  that  now  exist  would  never  have  been 
formed  had  there  been  publicity.  It  will  counteract  all 
the  dangerous  possible  tendencies  of  the  trusts  which  are 
honestly  organized  as  means  of  cheaper  and  more  abundant 
production,  and  it  will  enable  them  the  better  to  serve  their 
true  purpose.  It  will  be  a  protection  to  the  shareholder 
and  to  the  investor;  it  will  bo  a  "body-blow,"  even  if  not 
a  doath-blow,  to  extortionate  prices;  it  will  be  the  stimulus 
to  hi-rher  wages  and  to  better  prices  for  raw  materials;  it 
Avill  ho.  the  certain  preventive  of  railroad  discrimination 
and  of  all  special  favoritism;   and  the  effective  eurb  upon 


The  Remedy  for  the  Evils  329 

every  atteiiijit  hy  corporations  to  corrupt  lo,<]fislatiircs  and 
public  ollicial.-.  There  is  liardly  an  evil— either  those  in- 
lierent  or  supposedly  inherent  iii  trusts,  or  those  incidental 
to  them — which  full  and  eom})lete  publicity  will  not  do 
much  to  remedy,  even  ii'  it  doe.-  not  cui-c  completely. 

A  step,  then,  of  immediate  practical  importance,  a  rem- 
edy that,  in  the  present  liirht,  we  should  emjdoy  for  trust 
evils — one  that  permits  the  continuance  of  the  tiniverftal 
tendency  to  consolidation  which  has  so  far  always  brought 
success  to  industry  and  which  means  cheap  production  and 
distribtition,  and  yet  one  that  holds  us  hack  from  tlie  social- 
ism wliicii  would  strike  down  iiulividujilism — is  {hv.  remedy 
of  publicity. 

l)eniosthen':^s.  when  asked  what  arc  the  tlirce  j^rcat 
essentials  of  oratory,  replied,  '' First,  action;  second,  action; 
third,  action."'  If  asked  what  is  the  remedy  for  the  .irreat 
evils,  iTidustrial,  social  and  political,  which  are  inherent  or 
incidental  to  trusts,  our  answer  would  be,  ''  First,  public- 
ity; second,  publicity,  third,  ])ublicity,"' — the  remedy  which 
is  most  effective  in  itself  and  the  remedy  wliicli  ahnie  can 
suggest  the  fourth  and  all  others  that  may  be  needed. 


Appendix  A 


Till']    FEDERAL    AXTl-TRUST    ACT,    COMMONLY 
KNOWN  AS  THE  SHERMAN  ACT. 

'J'his  act  is  (MUitled,  "•'An  act  to  protect  trade  and  com- 
nierce  against  unlawful  unrestraints  and  monopolies."  It 
was  a])proved  .July  "id.  :1<S!)().     'J'lie  act  is  as  follows: 

}i(  it  ciKictcd  liij  the  S()i'il(:  and  Haitsc  of  Ii< preventatives  of  the 
I  nitcd  sttites  of  Ainiricn  in  Connres.^  (ixstnihlcd : 

Si:('.  1.  l-"\cry  coiitracl,  conihiiiation  in  tho  form  of  trust  or 
otlit'iw  is(>.  or  (-(mspiriU'v.  in  icst  raiiil,  of  trade  or  coninierce  among 
tho  ~('\i'ral  states  or  with  forei^'ii  nations,  is  hereby  declared  to  be 
illegal.  I'lvery  person  who  siiall  inak<'  any  such  contract  or  en- 
f^'age  in  any  siu-h  eoinhination  or  coiispiracy  shall  be  deemed  guilty 
of  a  misdemeanor,  and.  on  conxiction  thereof,  shall  be  punished  by 
tine  not  exceeding  five  thousand  doHars.  or  by  imprisonment  not 
exceeding  one  year,  oi-  by  both  said  punishments,  in  the  discretion 
of  ttie  court. 

Sfc.  2.  K\('ry  jierson  who  shall  monojioiize  or  attempt  to  mon- 
opolize, or  combine  or  conspire  with  any  other  person  or  per- 
sons to  monopolize  any  part  of  the  trade  or  commerce  among  the 
several  states  or  with  foreign  nations,  shall  be  deemed  guilty  of  a 
misdemeanor,  and,  on  conviction  thereof,  shall  be  punished  by 
lint*  not  exceeding  ti\e  thousand  dollars,  or  by  imprisonment  not 
(  xcecding  oiu>  year,  or  by  both  said  punisliments,  in  the  discretion 
of  the  court. 

Si:r.  ;{.  lOvciy  contract,  combination  in  form  of  trust  or  other- 
wise, ov  c<ui<[)irat-v,  in  restraint  of  trade  or  commerce,  in  any  ter- 
ritory of  the  I'nited  States  or  of  the  District  of  Columbia,  or  in 
restraint  of  trade  or  conmierce  between  any  such  territory  and 
another,   or    lictween   any   such   territory   or   territories,   and  any 


2,2,^  Appendix  A 

state  or  states  or  the  District  of  Columbia  or  with  foreign  nations, 
or  between  the  District  of  Columbia  and  any  state  or  states  or 
foreign  nations,  is  hereby  declared  illegal.  Every  person  who  shall 
make  any  sncli  contract  or  engage  in  any  such  combination  or  con- 
spiracy shall  be  deemed  guilty  of  a  misdemeanor,  and,  on  convic- 
tion thereof,  shall  be  punished  by  fine  not  exceeding  five  thousand 
dollars,  or  by  imprisonment  not  exceeding  one  year,  or  by  both 
said  punishments,  in  the  discretion  of  the  court. 

Sec.  4.  The  several  circuit  courts  of  the  United  States  are 
hereby  invested  with  jurisdiction  to  prevent  and  restrain  violations 
of  this  act;  and  it  shall  be  the  duty  of  the  several  district  attor- 
neys of  the  United  States,  in  their  respective  districts,  under  the 
direction  of  the  attorney-general,  to  institute  proceeilings  in  equity 
to  prevent  and  restrain  such  violations.  Such  proceedings  may  be 
by  way  of  petition  setting  forth  the  case,  and  praying  that  such 
violation  shall  be  enjoined  or  otherwise  prohibited.  When  the 
parties  complained  of  shall  have  been  duly  notified  of  such  peti- 
tion the  court  shall  proceed,  as  soon  as  may  be,  to  tlie  hearing  and 
determination  of  the  case;  and  pending  such  petition  and  before 
final  decree  the  court  may  at  any  time  make  such  temporary  re- 
straining order  or  prohibition  as  shall  be  deemed  just  in  the  prem- 
ises. 

Sec.  5.  Whenever  it  shall  appear  to  the  court,  before  which  any 
proceeding  under  section  four  of  this  act  may  be  ponding,  tliat  the 
ends  of  justice  require  that  other  ])arti(  s  slioukl  be  brought  be- 
fore the  court,  tlie  court  may  caune  tliem  to  be  summoned, 
whether  they  reside  in  the  district  in  which  the  court  is  held  or 
not;  and  subprenas  to  that  end  may  I)e  served  in  any  district  by 
the  mar.shal  therof. 

Sec.  6.  Any  property  owned  under  any  contract  or  by  any 
combination,  or  pursuant  to  any  conspiracy  (and  being  the  sub- 
ject thereof)  mentioned  in  section  one  of  tliis  act,  and  being  in 
the  course  of  transportation  from  one  state  to  another,  or  to  a  for- 
eign country,  shall  be  forfeited  to  the  United  States,  and  may  be 
seized  and  condemned  by  like  proceedings  as  those  provided  by  law 
for  the  forfeiture,  seizure  and  condemnation  of  property  imported 
into  the  United  States  contrary  to  law. 

Sec.  7.  Any  person  who  shall  be  injured  in  his  business  or  prop- 
erty by  any  other  person  or  corporation  by  reason  of  anything 
forbirlden  or  declared  to  be  unlawful  by  this  act,  may  sue  therefor 
in  any  circuit  court  of  the  United  States  in  the  district  in  which 


Appendix  A 


odj 


the  (Icfi'iulant  resides  or  is  found,  without  respect  to  the  amount 
in  colli r()\ci<y,  and  sliall  reiover  three-fold  tlie  damages  by  him 
sustained,  ami  the  cost  of  suit,  including  a  reasonable  attorney's 
fee. 

Si:c.  S.  That  the  word  "person"  or  "persons,"  wherever  used 
in  this  act.  be  deemed  to  include  corporations  and  associations  ex- 
isting under  or  aulliori/.ed  by  the  laws  of  either  the  United  States, 
the  laws  of  any  of  the  territories,  the  laws  of  any  state  or  the  laws 
of  any  foreign  country. 


Appendix  B 


ANALYSIS  OF  THE  BILL  PASSED  BY  THE  HOUSE 

OF  REPRESENTATIVES    IX    JUXE,    1900, 

AMEXDIXG  THE  SHERMAX  ACT. 

"  The  bill  amends  the  Sherman  anti-trust  law  so  as  to  declare 
every  contract  or  combination,  in  the  form  of  trust  or  conspiracy 
in  restraint  of  commerce  among  the  states  or  with  foreign  nations 
illegal,  and  every  party  to  such  contract  or  combination  guilty  of  a 
crime,  punishable  by  a  fine  of  not  less  than  $500  nor  more  than 
§5000,  and  by  imprisonment  not  less  than  six  months  nor  more 
than  two  years.  It  provides  that  any  person  injured  by  a  viola- 
tion of  the  provisions  of  the  law  may  recover  three-fold  damages. 
The  definition  of  '  person '  and  '  persons '  in  the  present  law  is 
enlarged  so  as  to  include  the  agents,  oflicers  or  attorneys  of  cor- 
porations. 

"  For  purposes  of  commerce  it  declares  illegal  all  corporations  or 
associations  formed  or  carrying  on  business  for  purposes  declared 
illegal  by  the  common  law;  provides  that  they  may  be  per- 
petually enjoined  from  carrying  on  interstate  commerce  and  for- 
bids them  the  use  of  the  United  States  mails.  It  provides  for  the 
production  of  persons  and  pa])ers;  confers  jurisdiction  upon  United 
States  circuit  and  district  courts  for  the  trial  of  causes  under  it 
and  authorizes  any  person,  firm,  corporation  or  association  to  be- 
gin and  prosecute  proceedings  under  it." — Ex, 

334 


Appendix   C 


SKCTioxs  Fmm  the  xi-:\v  youk  law  to  pee- 

VEXT  MOXOPOLIES. 

Tlie  anti-monopoly  law  of  Xew  York  i?,  "  An  act  to  pre- 
vent monopolies  in  articles  or  commodities  of  common  use, 
and  to  proliil)it  restraints  of  trade  and  commerce,  provid- 
intl  penalties  for  violations  of  the  ])r()visions  of  this  act, 
and  {)r()cedure  to  enal)le  the  attorney-general  to  secure  tes- 
timony in  relation  thereto."  This  act  became  a  law  ^May 
7  th,  1S!)T,  and  is  as  follows: 

I'fir  iicoiiJc  (if  the  State  of  ^eic  York,  represented  in  Senate  and 
.Ixxr/// '(///,  do  eniirt  as  folloirs: 

Skc.  1.  l^vtTV  contract,  ■aj,n'ecinent.  arrangement  or  combi- 
nation, \\iiei'el)y  a  monopoly  in  the  manufacture,  production  or 
sale  in  this  state  of  any  article  or  commodity  of  common  use  is  or 
may  be  created,  established  or  maintained,  or  whereby  competition 
in  this  slate  in  the  sujiply  or  price  of  any  such  article  or  com- 
modity is  or  may  he  restrained  or  pievented.  or  whereby  for  the 
]jur|u>se  of  creatiiifr.  establishing  or  maintaining  a  mono])oly 
within  this  state,  of  the  manufacture,  jjroductiou  or  sale  of  any 
such  article  or  commodity,  the  fife  ]iuisuit  in  this  state  of  any 
lawful  lju-;ines^.  trade  or  occupation,  is  or  may  he  restricted  or 
jirevented.  is  hereby  declared  t(_»  l)e  against  public  policy,  illegal 
and  void. 

Six'.  '2.  Kvery  person  or  cor})oration,  or  any  oflicer  or  agent 
ihcrcof,  \s  ho  .-hall  make,  or  attempt  to  make,  or  ent^-r  into,  any 
such  contract-,  agreement,  arrangement  or  combination,  or  \\  lu), 
within  this  stale,  shall  do  any  ad  pursuant  thereto,  or  in.  towai'd 
or  for  the  con^uuniiation  thereof,  w  lu  rcvi'r  the  same  Tuay  have 
been  made,  is  guilty  of  a  misdemeanor,  and  on  conviction  thereof 

335 


336  Appendix    C 

shall,  if  a  natural  person,  be  punished  by  a  fine  not  exceeding  five 
thousand  dollars,  or  by  imprisonment  for  not  longer  than  one 
year,  or  by  both  such  fine  and  imprisonment;  and  if  a  corporation, 
by  a  fine  of  not  exceeding  five  thousand  dollars. 

Sec.  5.  Whenever  the  attorney-general  deems  it  necessary  or 
proper  to  procure  testimony  before  beginning  any  action  or  pro- 
ceeding under  this  chapter,  he  may  present  to  any  justice  of  the 
supreme  court  an  application  in  writing  for  an  order  directing 
such  persons  as  the  attorney-general  may  require  to  appear  be- 
fore a  justice  of  the  supreme  court,  or  a  referee  designated  in 
such  order,  and  answer  such  relevant  and  material  questions  as 
may  be  put  to  them  concerning  any  alleged  illegal  contract,  ar- 
rangement, agreement  or  combination  in  violation  of  this  chapter; 
if  it  appears  to  the  satisfaction  of  the  justice  of  the  supreme 
court,  to  whom  the  application  for  an  order  is  made,  that  such  an 
application  is  necessary,  then  such  an  order  shall  be  granted.  .  .  . 

Sec.  C.  (As  amended  *  in  1899  by  the  so-called  Donnelly 
Law.)  No  person  shall  be  excused  from  answering  any  ques- 
tion that  may  be  put  to  him,  or  from  producing  any  books, 
papers  or  documents,  on  the  ground  tliat  tlie  testimony  or  evi- 
dence, documentary  or  otherwise,  required  of  him  may  tend  to 
incriminate  him;  but  no  person  shall  be  prosecuted  in  any  crimi- 
nal action  or  proceeding,  or  subject  to  any  penalty  or  forfeiture 
for  or  on  account  of  any  transaction,  matter  or  thing  concern- 
ing which  he  may  testify  or  produce  evidence,  documentary  or 
otherwise,  before  said  justice  or  referee  appointed  on  order  for 
his  examination,  or  in  obedience  to  the  subpoena  of  the  court  or 
referee  acting  under  such  order  or  either  of  them,  or  in  any  such 
case  or  proceeding. 

*  It  is  under  the  above  sections  5  and  6  that  proceedings  are 
j)cnding  for  an  examination  of  the  officers  of  the  American 
Ice  Co.  before  Referee  Nussbaum.  Before  amendment,  sec- 
tion (i  jiermitted  such  examinations  as  hereinabove  provided  for, 
and  declared  that  no  evidence  which  a  jjcrson  was  compelled  to 
give  in  such  proceedings  could  be  used  against  him  in  any  subse- 
fjuent  criminal  prosecution.  It  was  held  by  the  New  York  courts 
that  this  did  not  sufficiently  comply  with  the  constitutional  pro- 
visions against  compelling  a  i)erson  to  incriminate  himself;  hence 
tlie  amendment  as  above,  declaring  that  persons  testifying  in 
these  ])r(j(eedings  sliall  liave  full  immunity  from  criminal  prosecu- 
tion fur  acts  as  to  which  their  testimony  relates. 


Appendix  D 

LIST   OF  xiXTI-TRUST   LAWS 

Title.  Date  of  Enactmpnt. 

The   Federal   Aiiti-Tnist   Act Tiily  2,   1890. 

Alabama    liisurauee    Aet February   18,   1897. 

Arkansas   Anti-Trust    Act March   16,  1897. 

California  Cattle  Trust  Act February  27,    1893. 

Delaware  Life   Insurance   Law February    15,    1891. 

Florida  Lej^islatlon  Relatinj^  to  Trusts  and 
^Monopolies  for  tlie  Control  of  Trade  in  Cat- 
tle    rune  11,   1897. 

Ceorj^ia   Anti-Monopoly   Act December  23,  1896. 

Illinois    Act    rrohibitiiifj    Fools.    Trusts    and 

Combines    June   10,   1897. 

Indiana    Anli-Trust    Act :March  5,  1807. 

Iowa    Anti-Tool    and    Trust    Law May   6,    1890. 

Kansas    Law    Prohibitinp;    Trusts ^March  8,   1897. 

Kentucky  Law   Proliibiting  Fools,  Trusts  and 

Consjiiracies    :\Iay  20,   1890. 

Louisiana    Law   for   tlie   Froliibition   of  Trusts 

and  Combinations  in   Restraint   of  Trade.  ..  .Tiily   7.   1892. 

Maine  Anti-Trust    Law March   7,    1889. 

?tli(lii<ian   Anti  Trust  Act Tuly    1,    1889. 

^linnesota      Law       to      Prohibit      Fools      and 

Trusts    April  20,   1891. 

]Mississi])iii  Law  Prohibitinj:  Trusts  and  Com- 
bines     March   11,  1896. 

Missouri    Anti-Trust    Act 1891,    1895,    1897. 

Montana  Statute  a^Minst  Monopolies  and 
Trusts    1895. 

Nebraska  Statute  apainst  'I'rusts  and  Con- 
spiracies ai.'ainst   'i'rade   and    P.usiness 1895,    1897. 

337 


oo 


8  Appendix  D. 


Title.  Date  of  Enactment. 
New  Mexico   Law   Declaring  Trust   Combina- 
tions  Illegal    February  4,   1891. 

New  York  Law  to  Prevent  ilonopolies May  7,   1897. 

North    Carolina   Law    for   the   Prohibition   of 

Trusts   ]\rarch   11,   1889. 

North  Dakota  Law  Declaring  Certain.  Trusts 

and   Combinations  Unlawful March  9,   1897. 

Oklahoma   Law   to   Prevent   Combinations   in 

Pestraint  of   Trade December    25,    1890. 

South    Carolina    Prohibition    of    Trusts    and 

Combinations  February  25,   1897. 

South  Dakota  Anti-Trust  Law ]\Iareh   1,   1897. 

Tennessee   Law   to  Prohibit   Conspiracies   and 

Trusts   April  6,  1889. 

Texas  Law  for  the  Suppression  of  Trusts  and 

the  Promotion  of  Free  Coni])etition March  30,  1889. 

Utah  Law  Prohibiting  Pools  and  Trusts March  9,  189G. 

Washington     Law     Forbidding     Trusts     and 

Monopolies    March  21,  1895. 

Wisconsin    Statute     Prohibiting    Trusts     and 

Combinations   in   Kestraint   of   Trade April  27,  1897. 


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THE  NEW  ERA.  By  Dr.  Josiah  Strong,  author  of 
"Our  Country."  350  pages.  Library  Edition, 
cloth,  gilt  top,  $1.50  ;  plain  cloth,  75  cents  ;  paper, 
35  cents. 

Contents. — I.  The  Nineteenth  Century  one  of  Prepara- 
tion. II.  The  Destiny  of  the  Race.  III.  Tlie  Contribution 
made  by  the  Three  Great  Races  of  Antiquity.  IV.  The 
Contribution  made  by  the  Anglo-Saxon.  V.  The  Authori- 
tative Teacher.  VI.  The  Two  Fundamental  Laws  of  Christ. 
VII.  Popular  Discontent.  VIII.  The  Problem  of  the  Coun- 
try. IX.  The  Problem  of  the  City.  X.  The  Separation  of 
the  Ma.sses  from  the  Cliurch.  XI.  The  ^Mission  of  the  Church. 
XII.  The  Necessity  of  New  Methods.  XIII.  Necessity  of 
Personal  Contact.  XIV.  Necessity  of  Co-operation.  XV. 
The  Two  Great  Principles  Applied  to  the  Two  Great  Prob- 
lems.    XVI.  An  Enthusiasm  for  Humanity. 

"  'The  New  Era'  is  a  mighty  book." — Pres.  C.  F.  Thwing, 
Western  Reserve  UnitersitTj,  CUveUind,  Ohio. 

"  It  is  a  glorious  l)0()k.  It  surpasses  even  his  first  book  and 
ought  to  liave  millions  of  readers." — Rev.  Theodokk  L. 
CUYLEK,  D.D. 

"  Ought  to  be  read  by  everybody  interesttvi  in  the  advance- 
ment of  the  race." — New  York  Observer. 

"  Ought  to  be  distributed  in  every  church,  every  Sunday- 
school  and  religious  conviiutiou." — Eeaytgeiist,  N.  Y. 

"We  have  found  the  'New  Era'  abounding  in  facts  thai; 
are  food  for  the  thought  of  every  teacher,  preacher,  public 
speaker,  and  of  every  man  of  any  influence  in  social,  business 
or  political  life.  It  is  a  book  that  it  pays  to  read,  and  to  read 
carefully." — Albany  BJcening  Jour  mil. 

"All  in  all,  and  in  every  way,  this  is  an  eminently  timely 
and  valuable  book.  It,  is  full  of  facts,  is  carefully  thought 
out,  is  iidniirable  in  point  of  style,  is  conceived  in  the  finest 
Ciiristian  spirit,  and  will  serve  to  contribute  a  distinct  element 
in  the  per.sonal  '  higher  education  '  of  every  one  who  reads  it. 
Tlie  two  books,  'Our  Country'  and  'The  New  Era,'  fitly 
supplement  each  other," — Advance,  Chicago. 

Sent,  postpaid,  on  receipt  of  the  price,  by 

THE   BAKER  &  TAYEOR   CO.,  Publishers, 

5  &  7  E.\ST  Sixteenth  St.,  New  York. 


BAKER  tfe    TAYLOR   CO.S  PUBLICATIONS. 

THE  TWENTIETH  CENTUEY  CITY.  By  Kev. 
JosiAH  Stkoxg,  D.D.,  author  of  "  Our  Country  " 
and  "The  New  Era."  16mo,  paper,  25  cents; 
cloth,  50  cents. 

With  the  same  fascinating  presentation  of  facts  and  figures 
■which  made  "Our  Country"  one  of  the  great  books  of  the 
century,  Dr.  Strong  discusses  the  danger  arising  from  the  vast 
movement  of  population  towards  the  cities  and  the  growth  of 
their  preponderating  influence  in  the  Nation,  points  out  the 
principles  which  may  be  applied  successfully  to  the  solution  of 
the  great  problems  of  modern  society,  and  makes  a  ringing 
appeal  for  action. 

Contents. — I.  The  Materialism  of  Modern  Civilization. 
II.  A  Nation  of  Cities.  III.  The  Materialistic  City  a  Men- 
ace to  Itself.  IV.  The  Materialistic  City  a  Menace  to  State 
and  Nation.  V.  Remedies— The  New  Patriotism.  VI.  Reme- 
dies—Twentieth Century  Christianity.  VII.  Remedies — 
Twentieth  Century  Churches.  VIII.  Remedies — Practical 
Suggestions. 

"A  power  wherever  it  is  read.  It  should  be  in  the  hands 
of  every  teacher,  preacher,  editor,  public  speaker  and  thou- 
sands and  thousands  of  thinking  men  in  all  departments  of 
life."— A'^etc   York  Christian  Advocate. 

"Dr.  Strong's  new  book  possesses  the  same  fascination  of 
style  and  the  same  convincing  statements  of  facts  and  figures 
as  '  Our  Country.'  It  is  full  of  meat  to  the  student  and  think- 
er, for  the  politician  and  statesman,  for  the  office-holder  and 
the  voter." — Charleston  News. 

"  'The  Twentieth  Century  City'  is  a  book  that  will  help 
every  man  who  reads  it  to  be  a  better  citizen.  It  is  a  strong, 
sensible,  excellent  book." — Boston  Journal. 

"The  Kev.  Dr.  Josiah  Strong's  new  book  'The  Twentieth 
Century  City  '  is  worthy  of  cordial  welcome  by  every  lover  of 
progress  and  well-wisher  of  mankind— this  not  only  on  ac- 
count of  the  theme,  but  also  because  of  the  spirited  method 
of  the  author." — Eagle,  Brooklyn,  N.  Y. 

Sent,  postpaid,  on  receipt  of  the  price,  hy 

THE  BAKER  &  TAYLOR  CO.,  Publishers, 

5  AND  7  East  Sixteenth  St.,  New  York. 


BAKER  <f;    TATLOli   CO.'S  PUBLICATIONS. 


A    POPULAR    TREATISE    ON    INDUSTRIAL 
ORGANIZATIONS. 

THE  TRUSTS:  What  Can  We  Do  with 
Them?  What  Can  They  Do  fok  Us?  By 
lion.  William  ^Iillek  Collier,  Kew  York  State 
Civil  Service  Commissioner,  author  of  "Collier  on 
Bankruptcy,"  etc.  12mo,  348  pages,  cloth,  81.25; 
paper,  50  cents. 

A  careful  discussion  of  the  economic  and  political  questions 
springing  out  of  the  great  trust  problem,  dealing  with  the  in- 
dustrial benefils  and  evils  of  trusts,  and  also  the  necessar}-  re- 
strictions and  liuntatious  that  must  be  put  upon  them.  Mr. 
Collier  shows  in  what  way  large  industrial  organizations  are 
necessary  for  the  proper  accomplishment  of  tiie  gigantic  busi- 
ness undertakings  of  the  day,  esi)ecially  in  develojiing  and 
extending  our  foreign  trade  and  in  securing  markets  for  our 
surplus  products,  and  he  also  considers  the  extent  to  which 
they  limit  competition  and  are  monopolies.  He  discus.ses  the 
nature  and  scope  of  legislative  powers  over  trusts,  the  evil  of 
over-capitalization,  the  ellect  of  trusts  upon  wage-earners  and 
farmers,  and  the  proper  remedies  for  tlie  evils  of  trusts.  The 
social  phase  of  the  (piestion  is  considered  in  a  chapter  entitled 
'■  The  Man  and  the  Dollar,"  with  special  reference  to  William 
J.  Bryan's  famous  speech  at  the  Chicago  Trust  Conference. 
The  relations  of  the  tariff  and  of  territorial  expansion  to  the 
trusts  are  exhaustively  considered. 

The  topics  are  as  follows:  Tlie  Day  of  Great  Things.  What 
is  a  Trust  ?  The  Mother  of  Trusts.  The  Wastes  of  Competi- 
tion. What  is  Monopoly?  Prices  and  Potential  Competition. 
Trusts  and  Wage-Earners.  Trusts  and  Displaced  Labor. 
Trusts  and  the  Farmer.  Trusts  and  Special  Privileges.  Pro- 
motion, Over-Capitalization,  and  Publicity,  or  Wind,  Water. 
niul  Light.  Whose  Fault  is  It  ?  Trusts  and  Expansion.  The 
Man  and  the  Dollar.  Lecrislative  Powers  over  Trusts.  The 
Remedy  for  the  Evils.  The  Federal  Anti-Trust  Law  (Sher- 
man Act).  Analysis  of  Amendments  Proposed  to  Same. 
Sections  of  New  York  Anti-monopoly  Law. 

Sent,  postpaid,  on  receipt  of  (he  2>7-tce.  hy 

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5  AND  7  East  Sixteektu  St.,  New  York, 


BAKER  ^  TAYLOR  CO: S  PUBLICATIONS 


An  Epitome  of  the  English  Language  of  To-day 


The  Students'  Standard  Dictionary 

an  abridgment  of  the  famous  Funk  &  Wagnalls' 
Standard  Dictionary.  Moderate  sized,  but  full, 
easily  handled,  low-priced.  Contains  923  pages, 
60,000  words,  1,225  illustrations.  Incomparably 
the  newest  and  best  Dictionary  in  existence  for  the 
every-day  use  of  English-speaking  people. 

Thoroughly  new  from  cover  to  cover  with  exclu- 
sive features  of  extraordinary  importance.  It  is  the 
work  throughout  of  many  eminent  specialists.  Every 
particular  of  its  arrangement  has  been  especially 
designed  to  fully  meet  the  most  exacting  require- 
ments of  the  modern  dictionary.  In  its  ampleness, 
accuracy,  authority,  and  in  every  other  of  its  valuable 
features,  it  completely  supersedes  all  the  older 
abridged  dictionaries.  The  value  and  convenience 
of  its  vocabulary  and  appendix  characteristics  have 
never  been  approximated  by  other  works.  The  type, 
paper,  and  binding  are  of  the  highest  quality. 

"  This  is  a  treasure.  No  one  can  conceive  the  wealth  of  information, 
the  convenience  for  reference,  the  elimination  of  non-essentials  which 
make  this  book  wortli  much  more  than  the  price  to  any  student, 
teacher,  or  -^rxi^v."— Journal  of  Edticaiion,  Boston. 

"  To  say  that  it  is  far  ahead  of  any  students'  dictionary  that  has  yet 
been  published  is  only  giving  it  the  praise  it  deserves.  There  is  noth- 
ing in  the  same  field  to-day  that  can  excel  it." — Brooklyn  Eagle. 

"  It  should  have  a  place  in  every  school  and  upon  every  table  where 
accurate  scholarship  and  good  taste  are  appreciated  at  their  true 
worth."— William  F.  Phklps,  Director  State  Normal  Schools, 
St.  Paul,  Minn.  

8vo,  Heavy  Cloth,  Leather  Back,  $3.50  net 
Full  Leather,  $4.00  net 
Thumb  index,  50c.  extra 


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